Bitcoin was already trading near the lower trendline of the structure on Tuesday, expecting a break below it to target lower levels. However, Prince remained convinced of a rebound move towards $67,000, after which the price would fall towards the same support trendline to actually see a bearish breakdown this time.
Rising wedges warn of possible bearish reversals. Typically, a break below the lower trendline of the pattern takes the price down by as much as the maximum height of the wedge.
Therefore, depending on the height from which it breaks down, Bitcoin could risk a crash of at least $12,000.
Market catalysts are supporting a bullish bitcoin bias. Last week, U.S. President Joe Biden signed his $1.9 trillion stimulus package after receiving approval from both Congress and the Senate. With it, the Democratic leader is allowing Americans to receive direct payments of up to $1,400.
While many of the beneficiaries will use the aid to run their households, some analysts believe that a good portion of Americans will also use the payments – or at least a portion of them – to invest in stocks and the bitcoin market. Billionaire investor Mike Novogratz is one of them.
“A lot of the stimulus checks are going to young people who want to buy bitcoin,” he told CNBC earlier this week.
On the other hand, Federal Reserve officials will meet on Tuesday and Wednesday to discuss their future policy. The market believes that Chairman Jay Powell would leave their existing monetary policy unchanged, based on his recent comments.
Bitcoin (to buy bitcoins by instant transfer guide) could maintain its bullish momentum should this happen.
In the meantime, the headwinds for the cryptocurrency come from any potential directive on interest rate hikes. Markets have already priced in an earlier rate hike by pushing the yield on the 10-year U.S. Treasury bond up 60 basis points since the last Fed meeting. The central bank could confirm these expectations.
As a result, Bitcoin could suffer an early wedge breakout and risk a decline of around $12,000.