Bitcoin (BTC) surged to a three-month high during the first trading session in Asia on October 23, igniting hopes of a substantial rally among investors.
While this upswing has indeed rekindled confidence in the pioneer cryptocurrency, there is a strong to remain cautious, according to an October 22 post by prominent crypto analyst Ali Martinez.
Technical indicators point to a trend reversal
In his analysis, Martinez said BTC appears to be facing an “impending price correction,” following the latest rally unless it can print a daily candlestick close above $31,560.
There are two main indicators pointing at a potential reversal – a head and shoulders pattern, and the relative strength index (RSI).
As can be observed from the chart below, Bitcoin’s price may be forming the head and shoulders pattern, which is considered a reliable indicator of a trend reversal, usually from bullish (upward) to bearish (downward) or vice versa.
Given that Bitcoin is currently in an uptrend, a bearish reversal may be on the horizon.
Moreover, Martinez highlighted the RSI level at 74.21, which has consistently acted as a trigger for sharp corrections since March. In the wake of the recent rally, Bitcoin has once again reached this 74.21 RSI level, intensifying the indications of a potential price correction.
Further reinforcing the prospects of a correction is the TD Sequential indicator, which is hinting “at a possible sell signal” that may emerge on October 23, said the expert.
In a separate tweet, he said the looming correction could push BTC as low as $28,630.
Bitcoin price analysis
At the time of publication, BTC was changing hands at $30,622, up 2.6% in the past 24 hours.
The maiden cryptocurrency rose more than 8% over the past week and over 15% on the month, adding around $80 billion in market cap during this period.
The new upturn appears to be driven by growing speculations that the long-awaited spot Bitcoin exchange-traded fund (ETF) may be approved by year-end. These rumors brought a fresh wave of optimism among cryptocurrency investors as such approval would bring more institutional players into the crypto space and act as a significant price catalyst.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
