Avid followers of the Bitcoin price will attest to concerns over the current movement trends. Matters have now reached boiling point, with several analysts predicting the rise of a descending triangle.
Bitcoin currently trades at $10,206 across several cryptocurrency exchanges; up just 1 percent on the day. However, its price movements have given much cause to worry, as the effects of the surge that it saw in June seem to have worn off. Twitter analysts are predicting this, but as we all know, there could be instances where analysts get things wrong.
Scott Melker, an analyst at news medium Cointelegraph, recently ran his interpretation of the possible outcomes, and out of many inferences, it refuted the claim that the price of the asset would be a descending triangle.
For proper context, it would be appropriate to define what a descending triangle is. Primarily, this trend is a classical bearish pattern which is usually created when the price of an asset forms a descending trend line with lower highs, while another horizontal line with equal lows is seen as well.
The pattern itself could occur on both downtrends and uptrends. It usually has receding volumes before the breakout, and it is often confirmed when the price closes above or below one of the trend lines.
However, while many see the descending triangle as a bearish signal, there are some exceptions. Investor and author Thomas Bulkowski notes that descending triangles break up at least 53 percent of the time, while the triangle could even break up 63 percent of the time when it occurs in an uptrend.
Given these, Melker asserts that the odds of this triangle breaking down on the current Bitcoin trading price chart are only 37 percent. On whether the current Bitcoin price trend shows a descending triangle, Melker says, “In our opinion, no. The idea is there, but the specific criteria are not met. The two touches on the horizontal support (the second wick does not even technically touch) do not have a touch up to the descending resistance between them.”
The analyst adds that a lot of analysts try to work around this misinterpretation by saying that the bottom is a general area, and not a line. However, given the fact that strict chartists love to deal with as much accuracy as possible, this won’t prove a sufficient explanation.
Melker further pointed out that back in 2018, Bitcoin did form a descending triangle with support around $6,000; a support which eventually broke down to merely $3,200.
Traders have so far been comparing the recent trading pattern with that, suggesting that the price of the asset could be heading for a similar downturn. Refuting this hypothesis, Melker highlighted that the 2018 descending triangle fulfilled the technical criteria of alternating touches. In addition to that, the pattern began at a point when there was a clear downturn.
“And in that vein, if the current pattern is viewed as a descending triangle then traders should expect the same result — a continuation of the trend, which means that they should be expecting the price to rise, rather than drop, out of the pattern.”