A widely followed crypto analyst is lighting up a tweetstorm, warning traders that Bitcoin (BTC) has six reasons to go lower.
Pseudonymous trader CryptoCapo warns their 315,700 Twitter followers in a six-part thread that there are reasons to believe BTC will hit new lows soon.
“BTC – Some of the reasons why I think we should see new lows in the coming days
1) BTC broke the 30k support zone, which was the main pivot of the bull run. This is a zone, not a level. It’s between $29,000-$31,000, taking all the wicks. Now it’s testing that zone as resistance.”
The trader references a tweet from 10 days ago where he laid out why he didn’t think the $30,000 support level would hold for BTC.
Why do I think the 30k level won't hold?
-It has been tested many times, so it's weaker now. This is the 5th test
-There's not enough demand at this level (heatmaps prove this)
-It comes from a deviation from the range high + bear flag
-Selling pressure is still high pic.twitter.com/pTGtsobtqv
— il Capo Of Crypto (@CryptoCapo_) May 10, 2022
Capo’s second reason involves a bear flag signal he referenced in late-April 2022. The trader says the bear flag minimum price level has yet to be reached, another reason to believe BTC will continue lower.
“2) The minimum target of the bear flag hasn’t been reached yet ($23,000). You can also see this on altcoins, where some of the main targets haven’t been reached yet.”
CryptoCapo next looks at Bitcoin funding rates, an asset sentiment indicator, explaining why current rates point to a bottom. He tacks on a Bitcoin open interest (OI) chart for support.
“3) Funding rates have remained neutral/positive all the time. For a bottom to form, you want to see very negative funding rates. We haven’t seen that yet.
Also, OI didn’t show a capitulation candle (no big drop on OI).”
The crypto trader then looks at the Altcoin Perpetual Futures Index (ALTPERP), which tracks the price of a basket of leading altcoins, including Ethereum (ETH).
“4) ALTPERP is in no man’s land. It broke the key level, and the next support is 35-40% lower. This matches with the main targets of most alts and it would make a lot of sense.”
Keeping an eye on stocks, Capo says a bearish Standard & Poor’s 500 Index (SPX) combined with a bullish US Dollar Index (DXY) are bad omens for Bitcoin.
“5) SPX and DXY SPX is really bearish. It’s breaking supports like butter, and the bearish trend is getting stronger. Meanwhile, DXY keeps making higher highs and higher lows. It broke the previous highs and it’s using them as support now.”
Finally, the crypto trader looks at BTC heatmaps, an asset liquidity indicator, as the sixth and final reason why he thinks Bitcoin will reach new lows in the coming days.
“6) Heatmaps look bearish.
You can clearly see much more supply than demand, and some of the demand is getting weaker/moving lower.
Some examples below.”
Bitcoin is trading for $29,828 at time of writing.
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Featured Image: Shutterstock/Digital Store/Chuenmanuse
