Chart of the day: Bitcoin is aimed at $30,000, or even lower

The minutes of the December FOMC meeting published yesterday showed that the Fed is closer to raising interest rates than investors realized.

After this release, traders and investors withdrew funds from a variety of assets, including fast-growing technology sector stocks. Even treasuries turned out to be useless for investors in search of a “safe haven”, because the current yield pales in comparison with the expected higher interest rates.

Therefore, government bonds with shorter maturities traded better because they do not bind traders with a longer time horizon. The US dollar, the first candidate to benefit from a rate hike, showed flat dynamics. Investors are also betting on an imminent tightening of ECB policy.The prospect of higher interest rates did not even support bitcoin, which some are touting as a new “safe haven”, possibly able to replace gold in this role.

However, cryptocurrencies do not provide their investors with regular payments. Therefore, bitcoin was sold together with gold yesterday.

Technical signals now look as unfavorable for bitcoin as fundamental factors.

BTC/USD – daily timeframe BTC/USD – daily timeframe

The number one cryptocurrency by market capitalization continued to break down the large-scale “head and shoulders” (H&S) pattern, reflecting the trend reversal based on the highs and lows of the price.

When the price falls below the “neck line”, the trend line connecting the recent lows of the sideways movement serves as an ideal illustration of how supply begins to prevail over demand. Taking into account the preponderance of sellers over buyers, traders expect a resumption of momentum in the same direction — in this case, a downward one.

The reversal is also signaled by the fact that the price fell below the support on the 200-day moving average (MA) shortly after the 50-day MA crossed the 100-day average. If the 50-day MA fails to gain support above the 200-day MA, a “death cross” will be formed (even loyal supporters of fundamental analysis are familiar with this extremely unpleasant term).

It is worth remembering, however, that there were false breakdowns on the way. Experienced traders in this case use filters to reduce the risk of a “bear trap”. A close below the $42,000 level will increase the likelihood of another round of downward dynamics, and a close below $40,000 will further strengthen the bears’ positions.

The implied target level of H&S indicates another technical milestone for bitcoin.

BTC/USD — weekly timeframe BTC/USD — weekly timeframe

If it falls below $29,000, the formation of a large-scale double top will be completed. If this happens, bitcoin will head towards $0, no matter how improbable such a scenario may seem.