A value of around $1.4 trillion was cut from the S&P 500 on Friday as tensions escalated between Israel and Iran. Over the weekend and into Monday morning an exchange of missiles has taken place. Bitcoin is unlikely to escape the prejudicial effects on U.S. stocks and therefore another dip back to $60K with possible lower lows could be waiting.
Yet another bear flag forming
Source: TradingView
Since sweeping the low under $60K the $BTC price has staged somewhat of a recovery, rising 8.7%, which amounted to an increase of just over $5,000. However, it very much looks like yet another bear flag has formed, with its bottom at the recent low of $59,100.
The oversold condition that enabled the bulls to enact this latest recovery has now dissipated, and it looks like this latest bear flag might play out.
With renewed hostilities breaking out between Israel and Iran, the scene could be set for another leg down for Bitcoin, as sellers probably anticipate the next potential downward movement in the S&P 500.
Potential drop to $49K?
Source: TradingView
The daily chart is spelling out the next possible move in this Bitcoin bear market, and it’s not a happy one for bulls. The full measured move out of this latest bear flag could take the $BTC price down to $49,000. This lines up with support at the bottom of the huge 8-month bull flag that occupied most of 2024. It was also support and resistance during the tops of the 2021 bull market.
While still on the shallow side for a bear market bottom, compared with those in the past that measured 77% and more from top to bottom, this potential 61% bear market would be reasonably respectable.
All this said, the RSI has already been down to a low that was last matched in the March 2020 Covid crash. Could it go even lower? If it did, this could bring bullish divergence into play - exactly what would be needed to initiate the new bull market.
Could a retest of the bear market trendline be the bottom?
Source: TradingView
What really stands out in the weekly chart is how the bull market trendline and the 200-week simple moving average (SMA) have more or less followed the same trajectory since converging at the beginning of January 2024. This has become a very important support level to hold. Therefore, the recent dip just below the bull market trendline should be concerning to the bulls. A current rise back up to what could be a test and confirmation of the breakdown is also ominous.
If this support fails, increased downward momentum could begin. What would then be very interesting to see is whether a retest of the bear market trendline would stop the slide (as it did in the same circumstances when it became the bottom for the 2022 bear market), or whether the $BTC price would drop through and go to $49K or even lower.
The Stochastic RSI indicator lines are falling fast, signalling downward price momentum. Could they hit their bottom shortly after the market bottom, as happened in 2022?
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.