The crypto bloodbath that started during the first week of May seems to be having an extension as crypto prices continue to plummet during the weekend. Prices of the top cryptocurrencies got pulled back to the March 31 lows, which was the second time Bitcoin’s major support level was tested.
As of the time of writing, Bitcoin is trading at the $7,400 level, and is currently showing signs of reversal.
The downward price action was due to the huge decrease in trade volumes and total market capitalization. As of press time, total market capitalization is hovering around the $320 billion mark, which is a 43% decrease from the month-high of $470 billion exactly before the downtrend began.
Looking at the Bitcoin chart, we can see a triple bottom pattern forming. On the positive note, forming a triple bottom at the $7,000 strengthens the major support line on that level. We see this line supporting the February 6 and April 6 lows. However, on the negative note, the formation of the triple bottom means that we are still on a greater downward trend, which now forms a line that coincides with the January 19, March 5, and May 5 highs.
From here, based on the trend lines acting as major support and major resistance levels, we may see a consolidation phase in the next few days. This consolidation would involve bouncing price action from support level and resistance level.
During consolidation, if we get a surge in volume, we may see a price breakout through the resistance line. A sustained rally above the resistance line could signal an influx of cash back to the cryptomarket, which would propel Bitcoin to target the $10,000 major resistance level. However, if trade volumes continue to plummet, we may see further decrease in Bitcoin price, which may test the $6,400 support level.
(DISCLAIMER: This is not financial advice. The analysis and recommendations provided here are based on my own research and personal opinion. Trade wisely!)
