Ichimoku patterns – BITCOIN

Over the past few months, the correlation of bitcoin with indices such as the S&P500 or the Nasdaq has exerted downward pressure on the prices of the queen of cryptocurrencies. Bitcoin’s 60-day correlation with the S&P Index reached its all-time high of 0.74 on May 25, 2022 while my 20-day correlation between Bitcoin and the Nasdaq 100 reached 0.88 in May.

While this correlation has narrowed somewhat, another factor is now weighing on bitcoin prices – energy prices.

Mining company’s profitability depends on several factors: equipment (bought on credit), running cost (electricity) and revenue (the bitcoin price). Until April 2022, miners held on to their mined bitcoin each month in expectation of rising prices. Since then, they began selling their monthly production of bitcoin (and even parts of their overall holdings) in anticipation of rising energy costs (electricity). This has put strong downward pressure on bitcoin, dragging the entire crypto-currency market in its wake.  

Technical: 

BITCOIN D1 interval. Source: xStation5  

From a technical point of view, the declines stopped around 17550 points, which coincides precisely with the target 2 of the pattern, the so-called target 2 which represents the size of the pole. 

After making this new low in the middle of a capitulation phase, prices are trying to stabilize around $20,000 and could move sideways like during the early May decline, which ended around the target 1 of the pattern, which represents size of the flag. The previous sideways movement ended when prices approached the Ichimoku cloud, which could happen again if no catalyst gives the bulls enough fuel to recover $25,000.

BITCOIN H4 interval. Source: xStation5  

In a shorter interval, we can see that bitcoin prices have failed to break the neckline of an inverted SHS pattern, which led to a decline through the ichimoku cloud. A sell signal is about to be generated (prices out of the cloud), which could lead to further declines to the lows around 17 600. 

On the other hand, if bulls manage to regain control of the market and push prices to the other side of the cloud, this could result in sharp increases to rally to $25,000. If bulls managed to break higher this resistance, a stronger one  can be found at $30,000, just below the daily Ichimoku cloud. 

Reda Aboutika, XTB France

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