Bitcoin's price fluctuations over the past two months fit well into a triangle, with frequent bounces from levels near $31,500 and renewed sell-offs from increasingly low levels. A month ago the rebound lost strength at $40,000, a couple of weeks ago the price reversed already at levels above $36,000, and earlier this week the sellers took over at $34,000.
For now, bitcoin is supported by enthusiasts' belief in its attractiveness should it fall halfway through its peak levels. However, the trend towards a downward reversal from increasingly lower levels is a significant selling factor.
Given the hype nature of cryptocurrencies - they are often bought with the expectation of a rapid rise - a prolonged consolidation is increasingly frustrating for speculators.
Bitcoin trading volumes have fallen sharply over the past two months, down fourfold from their peak prices, with investors waiting for further declines and speculators curtailing activity.
A dip below the support line at $31,500 could take the price below $30,000 in a matter of hours. It would then become a matter of falling all the way down to levels at $23,300, where bitcoin was gathering strength for a spurt in January 2021. It cannot be ruled out that the price will even close the gap at $18,000. Such a turn of events could be a repeat of the crypto-zima of 2018. It would open the door for a commensurate price collapse with a bottom near $10,000 and zero in on the first cryptocurrency rally since October 2020.
Ethereum has been under pressure since July 7, returning to the area of last month's lows during that time, which is consistent with the overall market dynamics. That said, the current level near $1900 used to be a significant resistance area. The second cryptocurrency has formed a head-and-shoulders pattern, which creates significant downside potential to $600-700 should the market surrender its current defensive line.
Bitcoin, like Ethereum, has formed the prerequisites for an extremely strong decline in case it fails below current levels. More worryingly, there has been a lull in the cryptocurrency market in recent days, resembling a consolidation of bearish forces before a major strike. And this situation should not be seen as the stability of the crypto market amid a sell-off in equities or commodities. We have seen more than once in recent months how quickly a lull can turn into a massive collapse.