Bitcoin Technical Analysis: 21 June 2021

The US dollar index (DXY) gained about 2% last week versus a basket of other currencies. The S&P 500 went down by roughly the same amount. Despite the Fed’s endless money printing, the US dollar is still the best of a bad bunch in times of market uncertainty. In other words, if the dollar is going up, it is often the case that most other assets are going down. This includes bitcoin.

Bitcoin 1-day chart:

Bitcoin 1-day chart. Taken at 10.46 AM UK time.

If you recall our analysis last week, the bitcoin chart appeared to be going through 3 stages on the daily chart (based on closing prices):

1. A fast downtrend (first couple of weeks of May).
2. A slow downtrend (the rest of May and the first week of June).
3. A slow uptrend (this ended on Friday last week).

We have kept these trendlines drawn out on the above chart. We can clearly see that the ‘slow uptrend’ we were tentatively forming last week has now broken down. If you are a bull, these 3 things could also be concerning:

1. The daily MACD is starting to cross to down to the red zone. This shows that downside momentum is building.
2. The daily RSI has fallen back below the diagonal trendline we outlined last week. As mentioned last week, we would have liked to see the RSI get above 53 to confirm the restest and trend change.
3. Bitcoin got above the daily 21 exponential moving average (yellow line) but it did not stay there. At the end of last week it closed back below it. Last week we mentioned this was not something the bulls would have wanted to see and we have since seen fruther downside.

So what’s next for bitcoin? Are we going to break down?

As things stand, the bitcoin daily chart looks a lot more bearish than bullish in my opinion. Bitcoin had its chance last week to continue its uptrend but it failed miserably.

We can now extend the diagonal ‘lower low’ trendline to just below $32,000. If bitcoin closes a daily candle below this level, then a bigger breakdown becomes much more likely:

Bitcoin 1-day chart 21 June 2021. Taken at 11.31 AM London time.

It is worth noting that we are now testing the bottom Bollinger band on the daily chart. This can signal that we might bounce from here in the short term and go back into the range we have been in for the last month.

However, if we close the daily below about $32K then the Bollinger bands would also start expanding. This would mean that volatility is increasing while we are breaking below the range. That would not be good for the bulls.

If this breakdown occurs, there would be two easy ways to determine possible downside price targets, with any of these areas being fair game for a major bounce:

1. Downside Fibonacci extension targets of the previous drop.
2. Downside Fibonacci retracement targets of the previous bull wave (March 2020 Corona dump low until April 2021 high).

I have charted each of these below:

Bitcoin potential downside Fib extension targets if we break down. Chart taken at 11.50 AM London time.

Possible Fibonacci retracement targets if bitcoin is to break the range. Taken 11.57 AM at London time.

Is there still hope for the bitcoin bulls?

Bitcoin is hanging on by a thread and time is running out. But all is not lost. For bitcoin to turn bullish again, it would need to get back above the last high of about $41,800. At this point, the range would look more like one of accumulation for a larger upward move. Until that point, it is just in a range.

The longer it stays in the range the better it is for the bulls. To do this, bitcoin needs to bounce pronto. With that said, this is a very important week for the medium-term fate of bitcoin.

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Disclaimer: This is not investment advice, it is just my opinion on the bitcoin chart right now. I can and will be wrong because markets are not predicatble. My opinion can and will change depending on what the chart does next.