Bitcoin price is plummeting, with technical indicators suggesting a potential 20% decline

Bitcoin’s price has experienced a strong downward trend, recently trading near the $91,000 mark on December 30, which represents a 15% decline from its peak this year. Despite notable Bitcoin acquisitions from major entities like MicroStrategy and Tether, the cryptocurrency continues to slide. This downward movement suggests that Bitcoin might be facing additional downside, and technical analysis points toward a potential further drop of around 20%.

Although MicroStrategy increased its Bitcoin holdings by 2,138 BTC, bringing its total to 446,400 BTC, and Tether added 7,630 BTC, the price of Bitcoin remains under pressure. These purchases have not been enough to stabilize Bitcoin’s price, which appears to be facing profit-taking by investors who have already gained significantly from Bitcoin’s more than twofold increase this year. Additionally, the broader market sentiment seems to be risk-off, as evidenced by a rise in the US dollar index and declines in stock market indices such as the Dow Jones and Nasdaq 100. This indicates a shift away from riskier assets, including Bitcoin.

The rise in bond yields is another contributing factor. With the 30-year bond yield reaching 4.76% and the 5-year yield climbing to 4.3%, concerns over potential economic instability, particularly with the looming presidential election, are adding downward pressure on both the crypto and stock markets. Rising yields often make safer assets more attractive, drawing capital away from riskier investments like Bitcoin.

From a technical perspective, Bitcoin has recently failed to break through the 50-day Exponential Moving Average (EMA), which has now turned into a resistance level. Bitcoin has also formed a head and shoulders pattern, a bearish reversal signal that often precedes a significant price drop. The cryptocurrency is currently testing the $91,430 support level, which has held three times this month, but a break below this could lead to further downside. If the price drops through this key support, the next significant level of support lies around $73,780, which represents a 20% potential drop from the current price.

While Bitcoin’s long-term outlook remains positive, its short-term trajectory could face additional challenges. Rising bond yields, profit-taking, and bearish technical signals suggest that Bitcoin’s price may continue to retreat before any significant rebound occurs.