The UK FTSE 100 Index has opened 4% lower on Monday, while the German DAX is already down 6.7% on the day so far. The big Daddy of them all, the U.S. S&P 500, opens later. In the midst of this sea of red, and the possible carnage to come, Bitcoin (BTC) is fast approaching the top of its previous bull flag at $73,800. Is the crash of the century about to hit?
Will the sharpest drop in history take place?
If the S&P 500 records a further fall on Monday of 4%, it will be the sharpest drop in price since the Great Depression. At no time since then have there been three consecutive down days of 4% or more.
The U.S. stock market Fear and Greed Index has just fallen to a score of 4 in the Extreme Fear sector. This has never been seen before, and is lower than during COVID and the 2008 Great Financial Crash. This gives one an idea of just how bad market sentiment is currently.
Trump’s plan fraught with danger
It seems that the Trump Administration has gone all in on its plan to bring bond yields lower so that this year’s maturing $7 trillion parcel of debt can be refinanced at a much lower rate. The strategy appears to be to force capital out of stocks and into bonds. Bonds would then climb in price, but the yields would lower. This would enable much improved refinancing rates, and at the same time could force the hand of the Federal Reserve into lowering interest rates and providing the liquidity with which to drive the economy back up afterwards.
The plan looks to be fraught with danger, but the US is in such a perilous position with its debt that something drastic is needed in order to be able to service it. How does Bitcoin perform in this kind of situation?
$BTC price forming a descending channel
Source: TradingView
For the last 3 days Bitcoin is down about 10%. That said, it is so far holding up better than the S&P 500, which is down 10.5% over 2 days. The closing price on Monday will give an updated idea of how Bitcoin is able to cope with this environment compared with stocks generally.
The price action in the daily chart above looks as though it has formed a descending channel since the $109,000 all-time high. The price has fallen through the support of the last 37 days, and the bears are favourites to force the confirmation below at the end of today, thereby flipping the support into resistance.
If the $BTC price continues to drop, and gets down to the lower trend line of the channel, this would coincide with strong support from the bull flag within which Bitcoin traversed through most of last year, as well as the top of the previous bull market in 2021.
Bitcoin approaches truly epic support
Source: TradingView
The 2-week view of the Bitcoin macro picture is very telling. Could Bitcoin be in another bull flag? At the very least, the price would be more likely to leave the descending channel to the upside.
As it stands, as mentioned above, if the price continues down, it will meet the adamantine support of the top of the previous bull flag, and the very top of the 2021 bull market. This also matches the bottom trendline of the channel.
In its entire history, once Bitcoin has succeeded in breaking and confirming above its previous bull market high, it has never fallen back below this level.
The 2-week Stochastic RSI is bottoming, with the weekly Stochastic RSI also coming back to the bottom, while the indicator on the Relative Strength Index has reached the 50.00 level, which has acted as strong support and resistance previously.
As Monday’s price action plays out, especially once the U.S. stock exchanges open later in the day, who knows where it will end up? That said, the $69,000 support is of truly epic proportions, and price is not likely to continue to fall without any reversal rallies.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
