Fake Dip? The MOST important Bitcoin Chart Traders Are Watching

👇1-12) Beware of fake dips when triangles break. Bitcoin’s relative strength has retraced back to 40%, which has been associated with rally attempts on three occasions since early 2023. We are pointing out a new ‘line in the sand’ where we might change our view. The previous ‘line in the sand’ where we turned bearish was 68,300.

👇2-12) Although we had been (correctly) bearish in January 2024 (most will remember that), we turned bullish on January 26. The last sentence of our January 26 report stated, “We would use any further dip to start buying again.” Our view was also covered in CoinDesk (here).

👇3-12) We used the term new bull market as early as mid-January 2023 when lower inflation turbocharged the rebound. Hence, we focused on when a) inflation turned unexpectedly higher and b) the Fed turned less dovish. As we pointed out during the last few weeks, the situation might be very different, with severe consequences for Bitcoin - that’s why our analysis below might be of the utmost importance.

👇4-12) Bitcoin broke the triangle on March 11, 2023 (1), but quickly reversed when Treasury Secretary Yellen floated the idea for uncapped deposit insurance. Within days, Bitcoin rebounded massively from 20,000 to 28,000.

👇5-12) On June 15 (2), Bitcoin dipped below 25,000 after the FOMC meeting, only to quickly rally when Blackrock filed for a Bitcoin ETF. Although Bitcoin prices rallied to 30,000 on the back of this news over the next few weeks, by September 12, Bitcoin was back near 25,000.

👇6-12) Another triangle support broke on September 12 (3). But the dip was quickly arrested when Franklin Templeton joined the Bitcoin ETF race. While others, such as Fidelity, had announced their ETF intentions before, it was the application from Franklin Templeton that prevented Bitcoin from breaking the psychologically important 25,000 level.

👇7-12) The next triangle dip quickly reversed on January 26 (4) after CoinDesk published a bullish-sounding article based on some crypto research analyst views (here). Later that day, US Core PCE dropped more than expected from 3.2% to 2.9%—for the first time since April 2021, Core PCE was below 3.0%. This was bullish.

👇8-12) In all four instances, the triangle break was quickly invalidated. We cannot stress the word quickly enough.

👇9-12) The relative strength index returned to 40% in three of those four dips and rebounded. The April/May 2024 triangle breakdown looks ‘technically’ similar (RSI at 40%). Still, the break is more severe than during the previous four breaks, and the distribution pattern appears to resemble more a top than a lackluster sideways move, as in September, for example.

👇10-12) Our trend model is also in a downtrend, similar to January 2024, while it was in a bull trend during the other three dips—hence, buying those dips was appropriate as long as the trend was bullish.

👇11-12) The new ‘line-in-the-sand’ is the lower side of the triangle, roughly sitting at 62,000 (red line). There are also lower highs, confirming the view of a distributed top.

👇12-12) The longer Bitcoin stays below this level (the opposite of ‘quickly’), the more difficult it will become to break above it again. Our three reversal indicators are still bearish but could attempt to buy this dip if we fall deep enough or if we rally – which is still not our base case (but as always, we are open-minded and cannot rule it out, it crypto after all – anything is possible).