Bitcoin (BTC) started to rally after initial signs of weakness which led some traders into thinking that maybe the bearish setup is invalidated. However, if we zoom out and look at the BTC/USD chart, we can see that there is nothing to be worried about from a bearish standpoint as the price has just formed a double top and is now primed for a sharp decline. The RSI shows us that it tested the trend line resistance again and started to decline from there. Cryptocurrencies are now at a major risk of further downside and what we see in this market is perfectly in line with what is happening on major financial markets like the stock and bond market.
In fact the bearish EMA crossover that we see on the 1H chart for Bitcoin (BTC) can also be spotted on the 4H chart for the S&P 500 (SPX) and the daily chart for the Russell 2000 (IWM) which further strengthens or bearish bias and gives us more reason to expect that Bitcoin (BTC) is going to fall a lot more aggressively in the near future as major financial markets continue their downtrend. So, this points to the strong probability of BTC/USD declining to the top of the previously broken falling wedge in the near future. It would not be surprising to see the price even lower than that to sub $7,000 targets. In any case, the near term outlook of Bitcoin (BTC) remains very bearish.
Investors that have in the past gotten comfortable establishing a positive correlation between Bitcoin (BTC) and Gold (XAU/USD) might want to start worrying as we have now seen the price of Gold top out as well after it ran into the 61.8% fib retracement level. So, this leaves the bulls with no reason to think the price of Bitcoin (BTC) could rally from here. Stochastic RSI on the XAU/USD chart points to the strong possibility of an imminent decline and that does not bode well for Bitcoin (BTC) and other cryptocurrencies. Taking a look at Ethereum (ETH), we see that the price has declined below the 21 EMA on the 4H time frame. Meanwhile, the RSI has broken below a key support and now signals further downside in the price. All things considered, this is not a good time to be long on cryptocurrencies because the risk/reward is not worth it.