Omkar Godbole is a Co-Managing Editor on CoinDesk’s Markets team.
Analysts at alternative asset management firm Valkyrie Investments are closely monitoring what looks like a “head and shoulders (H&S)” bearish reversal pattern on bitcoin’s (BTC) daily chart.
The popular technical analysis pattern is characterized by two rallies or shoulders flanking a bigger one, representing the head. Chart analysts see it as a sign of an impending bullish-to-bearish shift in the market trend, with traders often taking bearish bets once prices drop under the trendline connecting the first and second troughs.
“High timeframe trend metrics remain firmly bullish, a near-term [bearish] reversal chart pattern has emerged. Although not classically meeting the textbook criteria of a head and shoulders, price action since March 19 has painted an extreme high with flanking lower highs,” Valkyrie’s analysts, led by chief investment officer Steven McClurg, wrote in a note to clients early this week.
“If price breaches below the neckline, a suggested target zone of $24,000 is possible based on the measured depth of the pattern extended below the neckline,” the note added.
A UTC close under the neckline support at around $27,300 would confirm a H&S breakdown, opening the doors for a deeper decline.
While a graphical representation of price action in the form of lines or candlesticks helps illustrate psychology, the patterns are a subjective form of analysis and often do not work as intended. In other words, a breakdown of the head and shoulders may not always lead to a more profound price drop and can trap traders on the wrong side of the market.
Macroeconomic developments can make or break trends and invalidate patterns. In other words, bitcoin may rally, invalidating the H&S if Friday’s U.S. nonfarm payrolls data signal labor market weakness. That would strengthen the case for the Federal Reserve (Fed) to pivot in favor of liquidity-boosting interest rate cuts.
Early this week, Federal Reserve’s Chairman Jerome Powell opened the doors for a potential pause in the rate hike cycle, but at the same time, stressed that the next move depends largely on the incoming data. The Fed has raised rates by 500 basis points since March 2022—the tightening cycle aimed at controlling inflation roiled cryptocurrencies last year.
According to a Reuters estimate sourced from FXStreet, the data due at 12:30 UTC is likely to show the economy added 179,000 jobs in April following a better-than-expected 236,000 additions in March. The unemployment rate likely held steady at 3.5%. The average hourly earnings are forecast to have risen 0.3% month-on-month and 4.2% year-on-year, matching March’s pace.
The odds of bitcoin witnessing a head-and-shoulders breakdown soon will increase if the wage growth and payrolls figure blows past expectations, putting a bid under the heavily shorted U.S. dollar.
Edited by Parikshit Mishra.
DISCLOSURE
Please note that our
privacy policy,
terms of use,
cookies,
and
do not sell my personal information
has been updated
.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a
strict set of editorial policies.
CoinDesk is an independent operating subsidiary of
Digital Currency Group,
which invests in
cryptocurrencies
and blockchain
startups.
As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of
stock appreciation rights,
which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG
.
Omkar Godbole is a Co-Managing Editor on CoinDesk’s Markets team.
Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.
Omkar Godbole is a Co-Managing Editor on CoinDesk’s Markets team.
It may not be the buzzword it once was among the tech set, but the metaverse has begun to get attention from financial institutions. With a user base and audience that are young, tech-savvy and in the early stages of their financial lives, metaverse applications offer banks unique opportunities to build relationships with a digitally…
As many as 28 Virtual Digital Assets (VDA) or crypto service providers have registered themselves with India’s Financial Intelligence Unit (FIU).The Indian Minister of State for Finance Pankaj Chaudhary told the Parliament’s Lower House in a written reply to a question on Monday.In March, India’s Finance Ministry mandated that crypto businesses will have to register
The U.S. employment market remained reasonably strong in June, with the U.S. Bureau of Labor Statistics reporting Friday the addition of 206,000 jobs, down from May's 218,000 (revised from an originally reported 272,000) but modestly topping economist estimates for 190,000. The unemployment rate in June rose to 4.1% versus 4.0% in May and forecasts for
The company plans to reach $16 million in a second closing of its Series A round. Funds will be used to strengthen its global expansion, with an emphasis on Latin America, Europe and Asia, among other projects. Parfin’s flagship product, Rayls, is an Ethereum Virtual Machine (EVM) blockchain system that unifies permissioned and public blockchains
Feb 25, 2020 at 12:00 UTCUpdated Feb 25, 2020 at 12:05 UTCBlockchain services firm Diginex is closer to listing on Nasdaq after the Securities and Exchange Commission (SEC) approved its bid to merge with publicly traded 8i Enterprises Acquisition Corp. on Friday.The $276 million deal will now be put before 8i’s shareholders for approval at…
Jul 23, 2020 at 13:00 UTCBitGo CEO Mike Belshe (CoinDesk archives)BitGo has added custodial and staking services for the Tezos blockchain’s native token, XTZ. Investors who store their XTZ with BitGo will earn an annual staking return of around 6% across BitGo’s hot and cold wallets, the custodial firm told CoinDesk on Thursday.Cryptos native to…
Aug 13, 2020 at 10:20 UTCUpdated Aug 13, 2020 at 10:42 UTCCryptocurrency miners (PHOTOCREO Michal Bednarek/Shutterstock)With Ethereum transaction fees soaring, the daily profit that can be achieved by miners on the network is now at its highest point in 27 months. Data from BitInfoCharts shows that the daily profitability for Ethereum miner operators is at…
Apr 23, 2020 at 13:55 UTCEXCEPTION: Glen Weyl favors “emergent cooperation,” but says the COVID-19 pandemic calls for concentrating power over “a very narrow part of the economy.” (Credit: Christine Kim for CoinDesk)How a Crypto Guru Shaped Harvard’s Roadmap for Reopening the US EconomyAn intellectual firebrand of the Ethereum community has played a key role…
The crypto sector's need for a friendly U.S. president became less urgent on election night as the Senate shifted toward the Republicans who've promised digital assets legislation. One of the U.S. lawmakers who stood in the path of crypto legislation, Senator Sherrod Brown, the chair of the Senate Banking Committee, was voted out — thanks