Does Bitcoin’s Double Top Indicate More Declines In 2022?

After falling 33% since early November, Bitcoin is definitely in a bear market. A technical pattern … [+] called a \Double Top\ implies that the bear is about to push the entire cryptocurrency market into a deeper decline. Photo by: STRF/STAR MAX/IPx


The two highs Bitcoin’s price hit in 2021 create what is known as a \double top\ pattern in technical analysis. Does this pattern indicate that the digital currency is headed for more declines in the near future?

Since Bitcoin has no inherent value, fundamental analysis if of no use in predicting future price movements. However, technical analysis, which looks at charts of past movements in a stock\’s price, looks for a series of similar patterns to predict the asset\’s direction in the future.

\Double tops can be rare occurrences with their formation often indicating that investors are seeking to obtain final profits from a bullish trend,\ says Investopedia, a site that explains the financial markets. \Double tops often lead to a bearish reversal in which traders can profit from selling the stock on a downtrend.\

Since Nov. 10, when it hit its all-time high $68,991, the flagship cryptocurrency has been sinking steadily. On Wednesday, Bitcoin closed at $46,445, a 33% dive over seven weeks.

When an asset\’s value drops 20% it\’s considered to be in a bear market. And Bitcoin looks like a grizzly.

For people who owned Bitcoin at the beginning of 2021, when it was priced at $29,001, Bitcoin has rallied 60% over the year.

And what a year it\’s been for the crypto market\’s bellwether. By April, as Coinbase – the nation\’s largest cryptocurrency exchange by volume – issued its initial public offering, Bitcoin\’s price had more than doubled to $61,684.

Yet a month later, Bitcoin entered a freefall precipitated by Tesla Motor\’s Chief Executive Officer Elon Musk. Musk, one of Bitcoin\’s biggest backers, had previously said he would accept Bitcoin as payment for a Tesla car. On May 13, he reversed this position. He said the excessive use of fossil fuels needed to mine Bitcoins was bad for the environment. But, he added, if people were able to use a more sustainable energy source in its production, Tesla would resume accepting Bitcoin.

Within two weeks, China, home to the largest Bitcoin mining community, started cracking down on its miners and crypto traders. Soon after, China threatened to ban Bitcoin and other cryptocurrencies. Other countries also threatened to start regulating cryptos. The crypto market tanked.

By July 20, Bitcoin had given up all its gains for the year, hitting a low of $29,361.

Then in August, investors started buying the digital currency in anticipation of San Salvador making Bitcoin its official national currency alongside the U.S. dollar. The Sept. 7 launch gave Bitcoin bulls validation that the coin could serve as a global currency. The day before the launch, the coin\’s price hit $52,854, an 80% surge from July\’s low.

Then late September, China banned digital tokens and made all transactions in cryptocurrencies illegal. Bitcoin fell to $40,693.

But in October it started climbing again as big banks jumped onto the crypto bandwagon and Gary Gensler, chairman of the Securities and Exchange Commission (SEC) said he wouldn\’t ban cryptocurrencies, which had been a cloud hanging over the market. 

Then Nov. 10, Bitcoin hit its all-time high. That same day, Coinbase, the crypto exchange that sparked Bitcoin\’s rally early in the year, released earnings. They missed Wall Street\’s expectations. Both the stock and Bitcoin took a dive. Since then, the coin\’s price has sunk 33%.

Last week, the coin bounced around $50,000, trying to break though the $52,000 technical support level. It failed and on Monday, started sliding again.

Another bearish indicator comes from Santiment data, which said investors who hold between 1,000 and 10,000 Bitcoins have been selling.

Looking at the charts of Bitcoin\’s price movement, technical analysis says $44,000 is the next support level. But if the price falls through that, there is no resistance level to stop it before it plunges to $30,000, where it started the year.