Bitcoin bubble about to burst? Analysts Warn The Price Could Drop To $7,000

Mike McGlone, a senior commodities strategist at Bloomberg, has Thrown light on Historical patterns of the rise and fall of Bitcoin (BTC), which are closely related to liquidity. According to McGlone, bitcoin at its current price level of around $27,000 could be at risk of a reversal, given that it was only $7,000 at the end of 2019 before a massive liquidity pump in 2020.

Bitcoin Faces Unprecedented Risk?

McGlone’s analysis also indicates that bitcoin’s downward trajectory, as demonstrated by its 52-week moving average, is the opposite of the upward trend experienced at the start of the pandemic. This shows that cryptocurrency is susceptible to booms when liquidity is abundant but vulnerable to busts when liquidity is removed. Thus, McGlone recommends respecting the 52-week down-sloping mean in assessing bitcoin’s directional bias.

That #federal Reserve Despite the bank run that raised rates in 1H, a decline in commodity and producer prices could reflect the potential for deflation for risk assets. keep growing #bitcoin And #copper vs rallying #equity markets Appears as an unstable trajectory. pic.twitter.com/deEhESQ62u

— Mike McGlone (@MikeMcGlone11) May 22, 2023

Despite the recent bank run, the Federal Reserve (Fed) has tightened twice, which may signal central bank toleration, McGlone pointed out, noting that copper and cryptocurrencies, including bitcoin, are heeding the warnings. Which contrasts notably with flexible stock. market.

In addition, recently Interview, McGlone warned that bitcoin could potentially experience a significant decline and return to the starting point of its 2019 rally around $7,000. McGlone cites drying up of liquidity and rising interest rates as key factors that could lead to a mean reversion for bitcoin.

Acknowledging the potential for a bitcoin rally, McGlone noted that the cryptocurrency has not yet displayed a strong divergence from other assets and suggested that investors should take a significant look at the S&P 500 and copper before considering long positions in bitcoin. Fall will have to wait.

Looking at bitcoin facts, McGlone noted that the cryptocurrency averaged around $7,000 in 2019, before a massive liquidity pump in 2020. It later rose to $60,000 before settling at its current level of $27,000. While bitcoin is still trading at four times its 2019 average price, McGlone warns that the risk of mean reversion remains and suggests that investors should exercise caution in the current market environment.

BTC’s ABC Pattern May Indicate Consolidation and Potential Growth

By crypto analyst Michael Van de Poppe assessed Bitcoin’s recent price action further suggests that the ABC pattern may be technically complete for BTC. The C wave turned out to be shorter than the initial A wave, and they are roughly the same length from the point of view of the price decline. The lowest wick from the base case was only $500, and the price seems to have entered a consolidation, as expected, albeit higher.

Van de Poppe noted that C waves having approximately the same length as the A wave are unusual, and that sometimes the C wave can go much deeper than the A wave. However, at this point, it is worth considering that the bottom of the C wave may be in. If there is another drop lower, it should happen in the first half of this week.

If the price breaks above $27,700 or even reverses a descending trend line, it could be an early sign that the consolidation is coming to an end, and bitcoin price looks set to continue higher. The last level to flip for higher conviction is $29,000, and the RSI is above 50.

On the other hand, if a daily candle closes below $16,700, a further decline is likely, and Van de Poppe’s target for this would still be $24,000 – $25,3000. Van de Poppe stressed that both scenarios are bullish in the medium time frame (months) as long as the price of bitcoin does not decline and stay below $22,000 in a sustained manner.

Featured image from iStock, chart from TradingView.com