While bitcoin has rallied over the past four days, some closely watched technical indicators suggest it could fall to its lowest level since December 2020 if it fails to maintain support above $29,000.
Bitcoin is currently hovering around $32,000, and its price is still down 16% in May. Bitcoin's recent rally is likely to be a blip before another big drop, rather than a sustained reversal of recent declines. Based on past price patterns, bitcoin could fall to $22,130 if it fails to hold the $29,000 mark.
"If bitcoin can hold the psychologically important $30,000 level, it could move further back into the $40,000 range," said Jamie Douglas Coutts, senior market structure analyst. "Technically, a break below $29,000 would confirm an ominous double-top pattern, with the next support at the May low at $25,424, followed by the 200-week moving average at $22,130."
In the second half of 2022, sophisticated investors will turn their attention to the halving of bitcoin rewards, the analyst said. This is a pre-programmed update that halves the miners' bitcoin rewards every four years, which reduces the supply of bitcoin and drives up its price. The next halving is expected in mid-May 2024.
Jamie Douglas Coutts said: "The strongest 12-month period since bitcoin awards were halved due to a decline in daily circulation."