- Bitcoin could fall back to $ 6,000 due to its historical technical structure.
- The analogy is shown after a BTC / USD chart has been switched from a normal to a more accurate logarithmic scale.
- It shows that the cryptocurrency has not exactly exceeded its long-term resistance to falling trend lines.
There is an extreme possibility that Bitcoin will drop toward $ 6,000 in upcoming sessions, as evidenced by a historically accurate technical setup.
The pair continues to trend within a large triangle on a weekly BTC / USD chart. It fluctuates between its two converging trend lines and has not seen a clear breakout with every new test since 2017.
Bitcoin tests the upper trendline of the Triangle. Source: TradingView.com
As of this week, Bitcoin tested the top trend line as it rose above $ 11,000. Still, the upward trend could not raise enough buying sentiment to paint an outbreak. It is similar to Bitcoin's previous attempts to break out in July 2019, June 2019, and December 2017.
A log chart
A majority of traders, on the other hand, are optimistic about the impact of a breakout movement on a linear BTC / USD weekly chart.
In retrospect, logarithmic charts are more accurate when it comes to narrowing down large price data. They are also useful when you need to recognize the percentage change or multiplicative factors of an asset. The balance explained::
“On the linear diagram, all movements of one dollar occupy the same visual space. Linear charts have a fixed gap between price levels, while log charts have intervals between percentage movements. "
The same Bitcoin pattern but on a normal chart. Source: TradingView.com
On a linear chart, the BTC / USD exchange rate has broken above triangular resistance, accompanied by an increase in trading volume. This indicates an outbreak, but without assuming the noise caused by price volatility: this carries the risk of counterfeiting – a bull trap.
The downside target on the weekly log BTC / USD chart is close to $ 6,000 – the lower trendline support. Therefore, if no convincing upward trend is achieved, the pair could fall in the upcoming weekly sessions.
While technical indicators paint a bearish picture, bitcoin may still break above its logarithmic resistance due to supportive macroeconomic factors.
The recent price recovery of the cryptocurrency towards $ 11,500 was initially based on a falling dollar. Second, safe haven assets – including gold – have also risen after US real yields have fallen below zero, leaving investors with no choice but to look for profits in riskier markets.
As the Federal Reserve tries to keep its interest rate close to zero and continue its bond purchase program until December 31, people seem to continue to buy gold and Bitcoin to protect their portfolios from inflation.