The recent price slide of Bitcoin (BTC) may gain momentum, as technical analysis by alternative asset management firm Valkyrie Investments suggests potential further declines towards $24,000. This month, Bitcoin’s value has dropped by 10% to $26,200, influenced by renewed hawkish Federal Reserve bets, recovery in the dollar index, and the ongoing uncertainty of the U.S. debt ceiling.
According to Valkyrie, the Ichimoku Cloud, a momentum indicator on Bitcoin’s daily chart, has turned bearish, prompting their prediction of further declines. The cloud, created by Japanese journalist Goichi Hosada in the late 1960s, is a widely used tool for identifying broader trends and generating short-term trading signals. It consists of five lines – Leading Span A, Leading Span B, Conversion Line or Tenkan-Sen (T), Base Line or Kijun-Sen (K), and a lagging closing price line.
A green cloud indicates a bullish trend, while a red one signals bearishness. In Bitcoin’s case, the daily chart displays a green Ichimoku Cloud, reflecting an overall positive outlook. However, the cryptocurrency’s price has recently fallen back into the cloud, while the Tenkan-Sen (blue line) has crossed below the Kijun-Sen (red line), in a bearish crossover.
Steven McClurg, Chief Investment Officer of Valkyrie, and his team of analysts noted that the bearish signals suggest that an ongoing high-timeframe bullish trend is accompanied by decreasing bullish momentum and the potential for near-term retrenchment. As Bitcoin’s price drops back into the cloud, the possibility of losing cloud support and triggering a move to the lower end of the cloud grows stronger. Analysts at Valkyrie suggest that such an “Edge-to-Edge” trade could bring Bitcoin’s price to around $24,000.
In early March, Bitcoin’s pullback halted at the lower boundary of the cloud, which led to a resurgence in prices up to $31,000 by mid-April. This showcases the importance of the cloud’s support in influencing the future direction of the cryptocurrency’s market value. A move to the lower edge would intensify the debate among investors as they weigh the benefits of stronger support levels against the risks of further decline.
As the cryptocurrency market continues to develop and mature, technical indicators such as the Ichimoku Cloud serve as valuable tools to decipher trends and provide insights into potential market shifts. While a sense of skepticism towards price predictions should always be maintained, the information above can guide decision-making for crypto enthusiasts and investors who strive to stay ahead in the ever-evolving digital currency landscape.