Bitcoin price failed to break out of its current downtrend after losing the $60,000 level this week, trading as low as $57,790 on Tuesday. However, one indicator points to further price corrections for the largest cryptocurrency in the market that could push the coin below its current levels.
Bitcoin faces major risks
Recently Posted on social mediaCryptocurrency analyst Ali Martinez pointed to the stochastic relative strength index (RSI) on Bitcoin’s two-month chart, which recently indicated a trend reversal from bullish to bearish.
This is noteworthy because historical patterns over the past decade show that similar signals have often preceded major price corrections at 84%, 59%, and an average of 75.5%.
The stochastic RSI is a momentum oscillator that measures a security’s closing price level relative to its price range over a specified period of time. When it indicates a downtrend, it indicates that the asset may be overbought and about to decline in price.
Interestingly, the last notable trend reversal occurred in 2022 when Bitcoin was trading at around $60,000. Following this signal, the cryptocurrency fell to a cycle low of around $16,000 before beginning a recovery that culminated in new record highs of $73,700 in March of this year.
If the current downtrend continues, Bitcoin could face a sharp decline. If there is a 75% correction from its current trading level of $57,000, the largest cryptocurrency could drop to around $14,200 per coin.
Such a large decline is likely to dampen bullish market expectations, especially in a year marked by the halving event in April, which has historically been a catalyst for price increases.
Could Bitcoin Price Rise Again After September?
In addition to bearish market sentiment, which could herald short-term trouble for Bitcoin, the leading cryptocurrency is facing a challenging September, which has historically been its worst performing month.
Market Expert Alex Thorne confirms Over the past decade, Bitcoin has seen declines in seven of the past 10 months, with losses ranging from 5% to 18%.
However, Thorne points out that October tends to offer a stark contrast to September’s declines. Historically, October has been Bitcoin’s best month, with the cryptocurrency often making significant recoveries. Gains in October typically range from 20% to 52%, making it a crucial month for bullish investors.
If Bitcoin can hold the lower support levels and successfully overcome the challenges of September, the market may be poised for a strong performance in October.
Featured image by DALL-E, chart by TradingView.com