A price spike to $ 40,000 to $ 42,000 won’t protect Bitcoin from the risk of a sharp decline later, according to a centuries-old price prediction model created by technical analyst Richard Wyckoff.

Overly confident bitcoin bulls will have to fight more than just Elon Musk’s tweets as the price prediction model created by pioneering technical analyst Richard Wyckoff more than 100 years ago goes against predictions.

The model, known as the Wyckoff Method, is based on a five-step approach to determining price trends, which mainly deals with the psychological reaction of investors to the supply and demand of an asset.

For example, in the case of accumulation, when an asset tends to bottom out after a sharp drop in price, the five time periods in the order include Sell Top (SC), Successful Secondary Test (ST), Support Point Last Support (LPS). , Sign of Strength (SOS) and “springboard” – signal more demand for the asset.

Wyckoff Events and Stages in Accumulation | Source: Stockcharts.com

The distribution case, on the other hand, is like an inverse version of the accumulation case, which consists of five periods in a strong upward trend.

Wyckoff events and stages in sales | Source: Stockcharts.com

The preliminary supply (PSY) signals a sharp increase in demand as prices rise as volumes increase. However, the uptrend will eventually dry up, resulting in a Buy Top (BC). What follows is a sell-off due to a lack of demand near the price of the asset holding out against the plentiful supply. Wyckoff calls this corrective action Automated Response (AR).

PSY, BC and AR together form phase A.

Meanwhile, Phase B involves a false recovery towards BC known as a secondary test (SET) followed by another decline that shows signs of weakness (SOW) in the asset. Phase B also often sees weak attempts to recover from the SOW in an upward direction (bullish – UT). Moving to Phase C then involves a final cleanup of the distribution known as the Post-Distribution Bullish (UTAD).

Phase D occurs when an alarming decline in demand relative to supply, also known as the Final Supply Point (LPSY), leads to a complete drop in prices in Phase E.

Bitcoin in “Phase C”

Tempting Beef, an Independent Market Analyst, suppose i think Bitcoin has entered the accumulation cycle of the classic Wyckoff pattern. The analyst reiterated recent rallies in the Bitcoin market, pointing to the potential of BTC / USD to maintain an uptrend above $ 40,000 as supply fades and demand picks up.

“The offer is running out. It could be ready for phase C. “

But Tempting Beef presented another contradicting scenario by reliving Phase A on the Wyckoff distribution charts. The analyst marked Bitcoin’s rebound from the $ 30,000 low as a PSY sign, which led to BC, AR, ST, SOW, and other consecutive events mentioned in the distribution periods.

Contradicting Wyckoff scenarios after predictions about Tempting Bitcoin market from Beef | Source: Twitter

Bitcoin lands by itself again in phase C, exhaustion alarm at Wyckoff distribution events. This means that the least risky spot on BTC is pointing down – a signal of a price crash.

Techniques are skewed Downward trend

Bitcoin’s recent correction in the spot market comes after a year-long bull run. From March 2020 to April 2021, the BTC / USD rate rose 1.582% to hit an all-time high near USD 65,000.

However, the couple has written off more than 50% of the profits. The price has collapsed, has rebounded and is currently consolidating sideways without showing any particular short-term trend. Hence, it now looks more like a distributed Wyckoff model as the periods of a year move up rather than down.

Meanwhile, after a sharp downward correction, Bitcoin has been consolidating in a symmetrical triangle structure since mid-May, suggesting that the pattern is indeed a bearish pennant. Technically, the bearish pennant will push Bitcoin down to the same size as the previous move.

Setting up Bitcoin’s bearish pennant signal falls below $ 20,000 | Source: TradingView.com

BTC / USD is trading at around $ 36.125, about 44% below the approximate ATH of $ 65,000 at the time of this writing.

You can see the Bitcoin price here.

Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.

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