- Assessing the chances of a return from strong selling pressure based on Bitcoin’s bearish pennant pattern.
- Directional uncertainty still plagues Bitcoin as volumes remain low.
If you own Bitcoin [BTC], chances are you are eagerly awaiting the prize to break the current 2 week deadlock. A recent analysis may provide insight into which side BTC is likely to take once it regains volatility.
Read Bitcoin (BTC) price prediction for 2023/2024
A May 24 CryptoQuant analysis revealed a good reason why Bitcoin is likely to experience a slump from its current levels. According to the analysis, the cryptocurrency is currently forming a bearish pennant pattern that is usually associated with a downward spiral.
Source: CryptoQuant
The assessment also suggested that the derivatives market was already moving in a way that suggested bearish expectations. The ratio of shorts to longs over the past 24 hours showed that 51.75% of traders went short and 48.25% went long.
A look at Bitcoin data that may support these bearish expectations
On-chain data also showed a pivot in Bitcoin’s estimated leverage ratio over the past 24 hours after previously recording a significant upside.
On the other hand, funding rates in the derivatives market are on the rise, suggesting that traders have positioned themselves for a potential big move.
Source: CryptoQuant
The bearish expectations are also evident in Bitcoin exchange flows. We have seen an increase in foreign exchange inflows since May 21, with inflows exceeding foreign exchange outflows.
This confirmed the rise in bearish expectations. Traders should note that the flow rate has slowed since then, but the inflow from Bitcoin exchanges is still dominant over the outflow.
Source: CryptoQuant
These findings indicate that more traders are harboring bearish expectations, which can consequently lead to such an outcome. While the current bearish pennant price pattern suggests a high probability of such an outcome, it may not necessarily be the case.
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Bitcoin investors should still exercise caution, as a large number of leveraged short positions can entice whales to buy.
Such an outcome would lead to higher price levels contrary to expectations, and many shorts would be liquidated as a result. This, in turn, would force short sellers to re-accumulate BTC, adding to another wave of buying pressure.
Note that these scenarios are currently still within the realm of speculation. This is because Bitcoin’s current level of buying and selling pressure is still low.
This means it may be too early to make an accurate estimate of the next big BTC price move in the near term. Nevertheless, the varying performance is now overloaded and a breakout/failure can occur at any time.