Bitcoin - How To Think About This Current Downside

Welcome to the Rekt Capital Newsletter, a resource for investors who want to better navigate the crypto markets with the help of cutting-edge crypto research and unbiased market analysis

Weekly Bull Flag - What Now?

After holding the Bull Flag bottom as support over the past few weeks, Bitcoin has ultimately Weekly Closed below it, and going forward it will be a pivotal week to see if this Bull Flag Bottom indeed turns into new resistance to confirm the breakdown or if price manages to reclaim the structure altogether.

Because if BTC can reclaim the structure, this downside would represent a fake-breakdown and price would continue in its Price Discovery Uptrend 2.

However, turning the Bull Flag bottom into new resistance would be considered a bearish retest and would confirm the breakdown as confirmed, resulting in additional downside, which would mean that the Price Discovery Uptrend 2 ended much quicker than has historically been the case.

For this reason, this week will be decisive and pivotal for the next trend.

Will this be a relief rally to confirm a breakdown and downside continuation?

Or will this price action end up as a downside deviation before resynchronising with the pattern and challenging for new highs?

The Bitcoin Roadmap

Technically, it is Week 5 in Price Discovery Uptrend 2.

But depending on what happens to the Bull Flag (reclaim or a confirmation of the breakdown), we will know whether the Price Discovery Uptrend 2 will continue or whether BTC had experienced a very short PDU2 instead.

That is, if BTC confirms additional downside from here, then it will turn out that PDU2 had ended in Week 2, which is extremely short for a Price Discovery Uptrend 2, especially since historical PDU2's have ended at the Week 5 mark.

So in essence, if Bitcoin reclaims the Bull Flag and challenges for new highs, then the Price Discovery Uptrend 2 will be progressing as per historical tendencies (though with some faking out downside volatility). That said, with this week being Week 5, the PDU2 should be starting to slow down to find its local top anyway (historically Weeks 5-6 have been the "Danger Zone" for PDUs).

Fail to reclaim the structure this week however and it will turn out that BTC has been in Price Discovery Correction 2 since mid-July, which would be going completely going against the grain of history.

Macro-wise however, whether the Local Top has already occurred or will occur in the next week or two, that still technically leaves plenty of time for a final Price Discovery Uptrend 3 which could overcompensate if this PDU2 first confirms underperformance.

In the rest of this newsletter, we'll look at what this downside means in the grander scheme of the cycle.