Bitcoin (BTC) price has broken out of an ascending support line formed at the beginning of the year. This bearish development could be the start of a sharp decline for Bitcoin.
Bitcoin (BTC) Sending a Bearish Signal
Looking at the price outlook from the yearly high of $25,250 on February 25, Bitcoin is falling. There are three main reasons for this:
First, the BTC price deviated from the $23,800 resistance area (red circle). Such deviations are considered bearish and lead to a bearish trend reversal in most cases.
Second, the divergence precedes a notable bearish divergence on the daily RSI (green line). The RSI is now below 50, another bearish sign.
BTC has finally broken the ascending support line, indicating that the upward move is complete.
If the downtrend resumes, the nearest support is at $20,850 formed by the 0.5 Fib Retracement support and the horizontal support area. This is the most likely scenario.
However, retaking $23,800 would invalidate this bearish outlook. This could lead to highs near $27,000.
BTC/USDT daily chart | Source: TradingView
Bitcoin Dominance (BTCD) Reaches Resistance
BTCD broke out of an ascending parallel channel on Jan. 17 and reached a high of 44.79% eight days later. However, it was rejected by the 0.618 Fibonacci Retracement resistance and has since declined. Currently, BTCD is retesting the resistance line of the channel.
If BTCD rebounds and breaks the 0.618 Fib resistance, a rally to 48.50% is possible. However, if it moves back inside the channel, a drop to the channel support line at 41% is most likely.
BTCD and Bitcoin price have near perfect correlation (blue). This means that an increase in one causes an increase in the other and vice versa.
This is also in line with BTCD falling as BTC price predictions are likely to be bearish.
BTCD daily chart | Source: TradingView
All in all, the most likely BTC price scenario is a drop to the confluence of support at $20,850. A close above $23,800 would invalidate this bearish scenario and could lead to a rally to $27,000.
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