Bitcoin Faces Major Threat: Head and Shoulders Pattern Signals Warning

Bitcoin has increased by over 50% since November 2024, but recent technical analysis suggests a possibility of a correction. The price chart of Bitcoin, the largest cryptocurrency by market capitalization, is currently displaying a pattern similar to the Head and Shoulders (H&S) pattern. This pattern often signals a significant trend reversal from an uptrend to a downtrend. How is the Head and Shoulders pattern formed In November, Bitcoin attempted to surpass the $100,000 mark but failed, forming the first "shoulder". In December, the price surged to $108,000 before sharply dropping to $92,000, forming the "head". Recently, Bitcoin's drop to $97,000 has shaped the second "shoulder". Analysts emphasize that Bitcoin is currently trading near a support level called the "neckline". This horizontal trend line connects the lows of both shoulders, currently around $91,500. If the price falls below this level, it could confirm the H&S pattern. What happens if the model is confirmed? If Bitcoin breaks below the neckline, the "measured move" technique predicts a potential drop to $75,000. This method calculates the distance between the head peak and the neckline and projects this distance below the neckline.

Investors should be cautious Although technical analysis is a widely used tool for predicting price movements, it is important to note that patterns such as H&S can sometimes be misleading. The high volatility of Bitcoin often leads to significant price fluctuations that can render such patterns ineffective. The price of cryptocurrency is still influenced by macroeconomic factors and the general market sentiment. Investors are advised to combine technical analysis with fundamental data to make informed decisions. Recent price action shows that Bitcoin is fluctuating at important support levels, making the market very sensitive to any significant changes.