In recent days, the first red candles appeared on the Bitcoin chart. The price dropped from $38,500 to $36,800. However, today we see Bitcoin partially recouping this loss by rising above $37,300. An upward movement that inspires optimism.
In this analysis we first look at the 4-hour chart, where a clear pattern is forming. This is interesting because it appears that Bitcoin has broken out here as well. Are we in for a major correction?
The Rising Wedge: A New Bearish Test?
Below you can see the 4-hour chart. Each candle represents 4 hours, which means we are talking about a relatively small period chart. The chart shows the price data for the past month.
It is clear that the price is constantly hitting higher highs and lower lows. As unfortunate as it is, it looks like this will come to an end soon. As a result of this trend, the price is forming a rising wedge, a pattern with a negative price target well below $35,000.
The price has already broken out of this pattern on the downside and it appears that we are currently dealing with a new bearish test: a test of previous support as resistance. Therefore, if the price does not close a candle above $37,500, you should be careful and a big red candle may be coming.
As mentioned, the price target is below $35,000. However, it is important to recognize that achieving this target would break the bullish structure. This makes it very likely that the price will recover from the previous higher lows. There are a lot of long positions here.
Open positions on the 15-minute chart
The fact is that there are often many long positions open below the higher lows, which the price often tries to liquidate. As I said earlier, if there is a significant price drop, Bitcoin will reach the level to close these positions.
This fact also applies to the short-term chart. For this we use the Bitcoin chart with open contracts. As the price of Bitcoin increases, open interest naturally increases as well. What does this tell us?
Simply put, during the upward movement on this 15-minute chart, traders open more and more long positions. We know what the price wants to do with these positions: liquidate. So in the short term it is entirely possible that the price will fall to achieve this. Please note that this is a very short term chart and therefore less accurate. However, what is important to me is that you know this fact. If the price and therefore open positions continue to rise, keep in mind that at some point long positions will be added and often removed again.
Source: BTCDirect
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Barry Siefert is an accomplished journalist and author at The Nation View. He is known for his expertise in the field of cryptocurrency, and has written extensively on the topic. With a background in finance and economics, Barry has a deep understanding of the underlying technology and market forces that drive the crypto industry.
