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Just a few weeks ago I called the reversal of Bitcoin and other cryptos. Here is a video of me explaining the bottom pattern and breakouts on bitcoin and ethereum:

Since that call, bitcoin is up nearly 20%, while ethereum is up over 60%! The patterns I’m looking for fired on both, but Ethereum looked much nicer. All we do is set the trade up and then repeat looking for the same techniques. He never fails.

A month after that reversal trigger call, why am I calling now for a sudden plunge?

As regular readers know, I said that cryptos move like risk on assets. It simply means that bitcoin and other cryptocurrencies move in tandem with stocks. If there is a major sell-off in stocks, bitcoin and other cryptos will also fall.

Currently, the stock markets look very bullish after closing above a major weekly level. Some call it the most hated rally. However, my eyes are still on that 10-year yield chart that is starting to appear today at the time of writing. If it continues to rise, it will put pressure on stocks and therefore on cryptos as well. The US Dollar (DXY) is another chart showing signs of a breakout. This would weigh on cryptos and precious metals.

But the main reason why I expect a major dump on bitcoin is because of the technicalities.

TradingView Chart

Bitcoin has recovered well since holding major support around $20,000 and breaking out of a range. This breakout was our reversal trigger. A few higher lows later, and bitcoin is now finding some resistance around $25,000.

When it comes to breakouts and reversals, I like my trades to have good momentum. We haven’t really seen that with bitcoin. The upward movement was slow and mute. The breakouts do not see a rally but rather a decline and a few days of pause before slowly rising again. It was not a strong rally.

Now I want to show you this technical model:

Using the Rising Wedge Pattern in Forex Trading

This piece of art you see above is known as rising wedge pattern.

Here is an example of this model on the graphics, but you can find tons of images on this model with a Google search.

Rising Wedge Chart Template |  Tradimo

A rising bevel pattern is a bearish continuation pattern. Its very important. This means that a rising wedge is forming after a long downtrend. He sees upward price momentum that creates the ascending wedge, before collapsing and continuing the downward trend.

Bitcoin does the trick. A rising wedge has formed after a long downtrend. Now all we have to wait for is the wedge to break. Once a daily candle closes below the lower trendline, the pattern is triggered.

Will it be because of a strong US dollar? Will it be a black swan geopolitical event? Or will it just be the Fed remaining hawkish and the markets pricing in more rate hikes? Or will it just be bad crypto news? Guess what. I mention the first three because of bitcoin’s risk on status. If bitcoin goes down, it probably means the stock markets are doing the same.

TradingView Chart

Ethereum actually has a similar pattern, but many crypto traders and investors say Ethereum’s decision is based on fundamentals. The merger as some are calling it, which will see Ethereum move from a proof-of-work model to proof-of-stake. This upgrade is scheduled to be completed on September 15, 2022, and the end result will be lower gas fees and faster transactions.

I hate to be THAT guy, but “buy the rumour, sell the news” anyone? I’m more of a technical trader, and our reversal was triggered when there was no merger news. To me, the wave of mergers is just one way for traders to try to explain this rise when the techs could have told you over a month ago. But I’ll save the battle of technical versus fundamental for another day.

On the technical side, Ethereum closed above a major resistance zone above $1750. The question is whether we can hold it. Since we took the plunge, there hasn’t been a new test. With the current market action, perhaps the pullback will lead to a retest of this zone. The lower part of the wedge also coincides with this $1750 area. If Ethereum fails to hold above $1750, this would also confirm the triggering of the rising wedge pattern.

So, in summary, a bitcoin, ethereum, and crypto dump appears to be near. We have a rising wedge pattern which is a bearish continuation pattern which is supported by the fact that these two cryptos have been rising in a choppy fashion.

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