The price of Bitcoin (BTC) has broken down below a descending parallel channel, and it may continue to decline to the $20.3k level.
On March 8th, addresses linked to the US government moved 49,000 Bitcoins seized from Silk Road to Coinbase. This could affect investor sentiment and exacerbate the decline of Bitcoin in the coming days.
Breakdown the ascending channel
After a strong increase since the beginning of the year, Bitcoin appears to have been trading inside an ascending parallel channel. This is a bearish pattern, often leading to a breakdown in most cases.
Indeed, BTC’s price has broken down below it on March 8th and is currently approaching the support area at $21.5k, created by the horizontal support zone and the 0.382 Fib retracement level.
Although this zone has previously helped BTC bounce back, breaking the ascending channel may trap bullish investors who bought in as the price approached the channel’s support line. Therefore, selling pressure may increase in the coming days.
If so, BTC may breakdown below the $21.5k support zone and decline to the next support area at $20.3k, created by the horizontal support zone and the 0.5 Fib retracement level.
The RSI indicator supports this possibility as it continues to decline and is below 50.
Bear flag pattern
Technical analysis from the 4-hour chart supports the possibility of further decline as Bitcoin forms bear flag patterns with many large red candles, indicating strong selling pressure at higher levels.
The RSI indicator also signals continued decline as it is in oversold territory and invalidated the previous bullish divergence (blue line).
Therefore, BTC may breakdown below the $21.5k level and decline to $20.3k before any significant relief rally occurs.
Overall, the most likely scenario is for BTC to continue declining to the $20.3k level. This bearish view will be invalidated if BTC recovers from the current level and reclaims the channel’s support line at $22.3k.
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