The weekly Bitcoin chart has printed a red candlestick in a way that has quietly preceded some corrections. This candlestick appears in the numbers: in the open, the push, the rejection and the close. That’s exactly what happened last week. The candle that has formed has now caught the attention of an analyst who has cataloged his entire history on Binance, going back to 2017, and what he discovered is the possibility of another Bitcoin crash.
Bitcoin’s weekly candle flashes a rare bearish setup
As noted by a crypto analyst who goes by the name Sherlock on X, the latest weekly Bitcoin candle is one of the ugliest candlesticks the asset can print. The analyst’s concern wasn’t just that Bitcoin ended the week in the red. It was the way the candle formed and where it closed compared to the week before.
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Bitcoin’s weekly candle came out three bearish conditions at the same time. He immediately turned red after a green weekly candle, his body engulfing the previous green candle and closing below the previous week’s low. This means that buyers briefly tried to extend the recovery last week but were rather overpowered the weekly closing.
The week started at $82,210. Buyers tried to make a move higher but failed, and by the end Bitcoin was trading at $77,457, creating a red candle after a green week. That kind of candle is important because it not only conveys sales pressure. A green week had first given traders the space to believe in Bitcoin remained stable above $80,000, but the next candle erased that advance and closed below the previous low. This changed last week’s rally in a bull trap.
What does this mean for Bitcoin?
Interestingly enough, this exact setup has appeared on Binance 33 times since 2017, and the historical record has been heavily tilted to the downside. During the twelve weeks following each signal, Bitcoin traded at least 3% lower in 31 out of 33 cases, at least 5% lower in 28 cases, at least 8% lower in 25 cases, and at least 10% lower in 23 cases.
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The deeper part of the analysis is the mean and median drawdown. The average uptake following this weekly structure was 20.9%, while the median uptake was 15.8%. Since Bitcoin closed at $77,457 last week, an average version of the price would see the price crash further to $65,000, while an average version would take the price close to $61,000.
At the time of writing, Bitcoin is trading at $77,800 and bulls trying to stay on top $77,000. The current weekly candlestick is now green, but there is still plenty of time for things to change before the week closes. The current weekly candle breaks out at a time when Bitcoin is under pressure from ETF outflows, and is currently experiencing a four-day outflow. according to data from SoSoValue.
Featured image created with Dall.E, chart from Tradingview.com