Bitcoin Bear Flag Formation & Death Cross: BTCUSD could soon reach $3000 levels
Bitcoin is most likely headed towards a significant price drop in the short term and could very well enter a prolonged Bearish phase in the long term. Right now, it all depends on whether it breaks the resistance at $6910.4. It needs to break the resistance with high volumes to give a clear positive indicator.
Currently, the BTC has entered a consolidation phase.
Death Cross and Bear flag formation: How significant is it?
The Bitcoin Technical charts formed a Death Cross pattern on March 25. A Death cross is the exact opposite of the Golden cross and signifies a medium to long term Bearish phase. Some of the previous Death Crosses have been false indicators. However, it seems to be more significant this time.
It is because there is a fair share of problems with the cryptocurrency currently:
- COVID-19 has caused a lot of fear among investors. Fear repels investments. Investors are even moving their investments out of safer assets such as gold. And we all know how volatile the BTC can be.
- The Hash rate that refers to the performance of the group of miners engaged in mining a block has dropped by more than 50%. The Hash rate determines the security of a network. This drop is the result of the price drop in Bitcoin. Since the price dropped by a considerable margin on March 12, Bitcoin miners are becoming less profitable. That means many miners would pull out of the network, and hence the 50% drop in the Hash rate.
- Miners earn a reward for every block they mine. This reward halves every four years. Presently, 12.5 BTC is awarded for every block mined. This reward is going to get halved this coming May. And that is all the more reason for miners preferring to move out of a network. And with falling Bitcoin prices, 6.25 BTC would not be enough for the huge computation power that the miners provide to the blockchain network.
Some analysts claim there could be a silver lining to this
A section of Bitcoin analysts believes that the falling Hash rate might not be an ultimatum. It is a group of miners at work after all, and not an individual miner. Thus, every group could have a different cost structure. And therefore, the risk-averse miners might back off, but the more aggressive ones could well retain their grounds.
It remains to be seen how the BTCUSD passes the consolidation phase around the $6,650 mark.