Bitcoin Double Top? Is It Time to Panic? How Low Prices Could Plunge?

👇1-11) Bitcoin continues to tumble, and liquidity sharply declines with falling prices. Many are afraid to look at their crypto holdings and take action. Bitcoin prices are still relatively high, but this could change soon. This is the time to make tough decisions. Only if we sell at high levels can we buy lower and come out ahead. Crypto often moves in parabolic up-cycles, but the difference between retail and institutional investors is risk management.

👇2-11) After Bitcoin failed to break higher, we warned subscribers to focus on risk management. We defined an Ethereum break at 3,725 (June 7: Ethereum Breaks Key $3,725 Support: Imminent Liquidations Expected?) as an early warning sign, followed by short signals for Bitcoin (June 12 BTC at 67,339) and Solana (June 12 SOL at 149.16) from our trading signals. According to our trend model, Bitcoin also moved into a downtrend on June 19 (at 65,140). Those three are trading at ETH at 3,423 (-8%), BTC at 63,264 (-6%), and SOL at 127.03 (-14%).

👇3-11) Bitcoin could shift from its current range trading (60,000-70,000) into a topping formation, potentially leading to a steeper decline. As we've observed over the past three months, range trading is a complex phase, often marked by several false breakouts. However, topping formations have historically left the average retail investor vulnerable, with many altcoins experiencing significant drops.

How low can Bitcoin go?

👇4-11) While all three (daily) reversal indicators are currently at distressed levels, indicating a potential rebound, our attention has shifted to weekly data. This still suggests the possibility of a significant topping formation, which could lead to a steeper decline. Additionally, our monthly data analysis indicates that the cycle might be reaching its peak - based on technicals.

Bitcoin - Double Top Formation could target 50,000

👇5-11) The critical level to watch is 61,500. If Bitcoin trades below this level, prices might drop into the low 50,000s — if not lower. Technically, Bitcoin appears to follow a double top formation, whereas the support level is being tested. This chart formation should be our base case unless it becomes invalidated. This formation could easily see a drop to 50,000—if not 45,000. Yes, the US election and CPI should be bullish later this year, but we can still have a steeper correction.

👇6-11) It's worth noting that many are still anticipating that an Ethereum ETF approval would have a bullish effect. However, it's essential to be aware that futures traders are currently very over-positioned, and if day-one ETF flows fail to meet expectations, a correction is likely. The market, which should ideally be long only $9 billion, is instead holding $11.5 billion in ETH futures, potentially leading to more liquidations.

👇7-11) Since June 10, Bitcoin ETFs have seen $1.2 billion in net outflows, with nine of the last ten trading days having seen net selling. However, the largest outflow comes from futures liquidations in Ethereum, which is $0.9 billion, and Bitcoin, which is $0.8 billion during the last week. The money flow data is negative for the second consecutive week. Blackrock and the FOMC meeting prevented a steeper decline last time when Bitcoin traded below 60,000.

👇8-11) Ethereum network activity has remained extremely low, with transaction fees (Gwei) at their lowest since 2020. The number of active Ethereum addresses has stagnated at 500k since January 2021. Bitcoin miner revenue has declined back to $32 million, which is extremely low for such a capital-intensive industry. Bitcoin miners have become large sellers of BTC inventories, and with an average Bitcoin mining cost of around $60,000 per coin, Bitcoin prices are approaching break-even costs quickly.

👇9-11) Similarly, Bitcoin ETF holders might have an average entry price of 60,000, whereas investors buying immediately after the ETF launch had better entry levels as prices were lower. Those investors might be arbitrage funds as the funding rate was materially higher in January and February, while the sub-60,000 dip in April might have been retail-driven - as the funding rate was low.

👇10-11) This would explain why the 13F filings showed many hedge funds as Bitcoin ETF holders by March 31, 2024, while last week, Blackrock indicated that 80% of Bitcoin ETF holders are (self-directed) retail investors. Crypto trading volumes have been among the lowest since this bull market started in October 2022, indicating a lack of interest from investors. This will likely remain the same even if an Ethereum ETF is approved.

👇11-11) As Bitcoin periodically has parabolic bull markets, we – as traders – are prepared to buy breakouts. But when they fail, we have to become risk managers. We have had several signals and indicators at 65,140 and 67,334 that made us turn bearish on Bitcoin. Crypto has benefited from a bullish stock market, single-handedly driven by NVIDIA, a stock that had an outside day last week (a higher high and a lower low than the previous day). Often, this indicates a decline is ahead. If stocks lose momentum, Bitcoin will also struggle.