Bitcoin (BTC) neared two-month lows on May 12 amid fears that a “head-and-shoulders” pattern would put bears ahead.
Analysis of BTC price: “Welcome to bearadise”
Despite encouraging macroeconomic conditions for risk assets, Bitcoin failed to capitalize on the potential for gains as bid liquidity headed lower.
“Welcome to bearadise,” on-chain monitoring resource Material Indicators summarized.
A chart uploaded to Twitter the day before showed principal buy support now around $25,750, with BTC/USD eating liquidity higher overnight.
On daily timeframes, concerns among market participants thus focused on whether the pair would now stay lower after three local tops.
This “head-and-shoulders pattern,” now clearly visible on the chart, would create a negative precedent should it confirm.
“We simply cannot let the #Bitcoin head and shoulders crowd win,” financial commentator Tedtalksmacro insisted.
“Back above $27k things will get very interesting…”
Trader and analyst Moustache meanwhile showed that it was already time for the key 200-week moving average (WMA) to receive a retest.
A “make or break level,” the 200 WMA has served as support since mid-March.
At the same time, $BTC is testing the middle line in the Gaussian Channel.
This is really strong support and a make it or break it level imo. pic.twitter.com/auzL125G1W
— ⓗ (@el_crypto_prof) May 12, 2023
As Cointelegraph reported, multiple traders were already looking for a deeper retracement to $25,000 or lower.
#BTC repeating same path
25k$ seems to be the logical level everyone tends to spam the BUY button
— Mikybull Crypto (@MikybullCrypto) May 12, 2023
These included nominally bullish Jelle, who conceded on the day that Bitcoin may make a “last stab” at the $25,000 mark before reversing.
He noted that relative strength index (RSI) readings were not serving sellers well on low timeframes.
“Bitcoin nuked straight through support, next major zone of interest is around 24-25k,” he tweeted.
“RSI is failing to push into the extremes, suggesting sellers are getting exhausted. One last stab into 25k that gets quickly bought up, would make sense.”
Longs get bolder as BTC price sinks
More confident that the worst losses would soon be over was analyst Philip Swift, co-founder of trading suite DecenTrader and creator of data resource LookIntoBitcoin.
In a tweet, he noted that while the price has been falling, the long/short ratio has diverged, with long positions now prevalent.
Im not convinced we have a major correction coming on this Bitcoin move down.
Near term though it is interesting to note that the long/short ratio has been climbing as price has trended down. pic.twitter.com/sefGEi39CD
— Philip Swift (@PositiveCrypto) May 12, 2023
Additional data from Coinglass put the long/short ratio at 58.7% long at the time of writing on May 12.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.