The pair will likely continue falling as sellers target the lower side of the ascending channel at 21,500.
Sell the BTC/USD pair and set a take-profit at 21,500.Add a stop-loss at 24,000.Timeline: 1-2 days.
Set a buy-stop at 23,500 and a take-profit at 25,000.Add a stop-loss at 22,000.
The BTC/USD price pulled back during the American and Asian sessions as the recent spectacular rally faded. Bitcoin dropped to a low of $22,800, which was the lowest level since July 28th of this year. It has fallen by about 7% from its highest point in July.
Cryptocurrency Rally Fades
Bitcoin price had a strong performance in July as cryptocurrencies bounced back. This performance mirrored what happened in July last year as most coins went on a strong rally.
There were several catalysts for the strong rally that happened in July. First, Bitcoin tracked Ether, which had a strong month as investors waited for the upcoming merger. The merge will combine the proof of work (PoW) blockchain with the Beacon Chain, which is a proof-of-stake (PoS) platform.
Second, Bitcoin’s rally coincided with the strong performance of the American stock market. The main US indices like the Dow Jones, Nasdaq 100, and S&P 500 rose sharply and had their best month since 2020. In the past few months, Bitcoin has had a close correlation with these indices.
Third, the BTC/USD pair rose in July as investors assessed the impact of the recent cryptocurrency sell-off that saw companies like Three Arrow Capital, Voyager Digital, and Celsius file for bankruptcy protection. At the time, there were worries that the events would lead to a major contagion like what happened durng the dot com bubble. These fears did not materialize.
Finally, Bitcoin’s rise coincided with the period when the US dollar ended its strong performance. The dollar index rose to a 20-year high of $109.30 and then pulled back to the current $105.30. Bitcoin tends to have an inverse correlation with the US dollar.
The four-hour chart shows that the BTC/USD pair has been in a strong bearish trend in the past few days. This sell-off started when the pair moved to the important resistance level at $24,616, which was along the upper side of the ascending channel. It has moved below the 25-day and 50-day moving averages.
A closer look shows that the pair has formed a small head and shoulders pattern while the Relative Strength Index (RSI) has continued dropping. Therefore, the pair will likely continue falling as sellers target the lower side of the ascending channel at 21,500.
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