Bitcoin’s price is falling sharply. It lost 5 % today, and retraced almost 8 % against its July 24th intermediate top. Bitcoin’s chart (first chart below) looks scary. As we see a crash on Bitcoin’s chart we try to understand whether there is (sufficient) reason to be concerned at this point in time.
We would definitely agree with readers if they start getting concerned, at least if it would be based on the form and structure of the first chart embedded below.
Note, before proceeding, that this 5 % crash is nothing compared to the week with 40 % price drop in December last year.
Bitcoin’s chart shows a crash this week?
Back to this week’s price drop in Bitcoin, there are 2 important things to point out.
First, on the first chart outlined below, there is no breakdown visible. A breakdown is a chart technical term which indicates that a rising pattern is invalidated in which case a bearish trend starts. The first chart would really be scary if Bitcoin’s price was falling below $7400 as that would have been a breakdown. It is not happening, at least not for now.
Second, and way more important, the timeframe of the chart. The first chart below is Bitcoin’s hourly chart. Readers are so focused on the very short term that they forget the big picture which is way more important than the short term.
Crypto is, by far, the most volatile asset in the market. It is way too risky to focus on the short term charts. The big picture trend(s) must be respected. That’s why the daily chart, in log scale, is the one of primary focus, combined with the weekly chart.
Bitcoin’s daily chart is outlined below, see the second chart.
This daily chart looks much more constructive than the hourly, and that is the whole point we are trying to make.
Our point is this: there is no crash whatsoever if you zoom out, on the contrary, there is a constructive pattern.
Look how the $6k level in Bitcoin has been holding up very well, with a V-shaped recovery first, followed by longer rounding bottoms, a very constructive pattern.
So to answer the question: are we concerned? No, we are not, until Bitcoin dips below $6k there is no reason whatsoever to be concerned. This is a normal recovery process.