Bitcoin breakout or bull trap?: Another 30% decrease possible

04 Jul, 2019 | Updated: 04 Jul, 2019
by Lourens Pepler
Price Analysis
Bitcoin breakout or bull trap?: Another 30% decrease possible

Bitcoin is back at $12000 after a 30% decline from its high of $13800. Since we still believe that BTC must complete a 40% retrace, today, we look at this breakout on price, to see whether it can take BTC higher, or if it is simply a bull trap that will lead to a further decline in price. This is the BTC analysis for 4 July 2019.

Highlights:

- Above downtrend resistance

- RSI showing weakness

- BTC still needs to complete 40% decrease

- RSI to reach below 40 on daily?

Starting it off with the 15 min chart, the first thing we notice is that BTC is currently above the overall downtrend resistance line on price, but is still below the trend on RSI and also still below 50. As we know, during a downtrend the 50 RSI acts as resistance for momentum. 

What this indicates is that price is currently overextended and that we should expect the price to want to move back down to below the trend, as the momentum behind this breakout is weak. This is also known as a bull trap.

BTC/USD chart provided by Tradingview

Moving over to the 4-hour chart, we can see that BTC has again hit resistance at the $12000 level on price. A break above $12000 would have been a sign that Bitcoin is back in bull mode and ready to make new highs, but since it failed to breakout above, it leads us to believe that we will now see BTC return to its decline or at least push sideways for a bit. We also notice that RSI is still making new lows, indicating that this decline is not done yet.

BTC/USD chart provided by Tradingview

Lastly, taking a look at the daily chart and moving back to the 2016 chart, we notice that momentum reached below 40 on RSI after most heavy uptrends. Since we have not yet seen RSI reach this far down and we also have a heavy uptrend, it could indicate that BTC still has a decline in the way that would get RSI to a value below 40. This will mean that selling momentum has reached its absolute bottom and that we can expect BTC to keep rising from here.

BTC/USD chart provided by Tradingview

Our resistance for today remains at $12000, but if BTC is able to breakout from this level, it could indicate that Bitcoin is ready to move onto new yearly highs. For now, we remain cautious and keeping an eye on the 4-hour momentum to see if it wants to move back down for a new low on RSI.

Do you think today's rise is simply a bull trap that will lead to a decline in price or was this a breakout and we will see BTC push onto new highs? Let us know what you think in the comments below!

Disclaimer: Keep in mind this not investment or trading advice, just the opinion of our analysts. As always, do your own research, make your own decisions.

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