The Christmas rally that dragged bitcoin more than 25% off its 16-month low could be coming to an end, with a retest of recent lows on the cards, warns one analyst.
Bitcoin, the best-known of the 2,000 or so cryptocurrencies, has not logged consecutive winning weeks since early-September, but the bounce off the Dec. 16 low and subsequent consolidation has the bitcoin aficionados calling the bottom. But Jesse Colombo, analyst at RIA Advisors, said die-hard fans should cool their jets as a looming chart pattern could spell danger for owners of the world’s largest digital currency.
“According to my analysis, however, bitcoin is forming another triangle pattern and is likely to make another big move once a breakout occurs,” wrote Colombo. “Bitcoin is still in a confirmed downtrend and a breakdown from this pattern would likely foreshadow the cryptocurrency hitting the low thousands or even under $1,000, eventually.”
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Colombo calls this setup a continuation pattern where the same formation occurs — in this case, a descending triangle — and a break would see similar declines to the prior move. “We could see another couple of thousand on the downside should we break,” Colombo said in a follow-up call with MarketWatch.
But at these levels, even some of the biggest crypto skeptics argue the bounce has legs. Jeffrey Gundlach, the CEO of DoubleLine Capital, said on Tuesday a move to $5,000 is possible, adding it could be an “easy 25%.” But the Los Angeles-based money manager, who was speaking in his annual “Just Markets” webcast, added that trading digital assets is “not for the faint of heart.”
Gundlach famously predicted bitcoin’s drop from its all-time high, advocating selling it on Dec. 13, 2017, when a single bitcoin
was fetching more than $16,000.
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However, Colombo — who predicted the break below $6,000 in October — said the overall trend is tough to go against and that the risk is that the remaining fruits of the 2017 rally could soon be wiped out.
“If bitcoin breaks down from the current triangle, the downtrend will continue as the digital currency further erases its gains made during the 2017 cryptocurrency bubble,” he wrote.
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