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Summary: Bitcoin closed the month of May at $27,210, with an overall return of -7.2% for the month of May. The market is currently expecting that historical monthly returns indicate that Bitcoin prices may continue to fall in the next quarter. However, from a technical chart perspective, does the market's failure to break the low point of wave 4 imply the imminent start of upward impulse waves?

Fundamentals

The cryptocurrency market lost another 0.8% of its market cap in the past 24 hours, falling to $1.128 trillion, similar to the level observed last Friday. Bitcoin declined by 1.4%, while Ethereum dropped by 0.8%. Most of the top cryptocurrencies are down, with the exception of Litecoin, which saw a 3% increase.

Bitcoin has seen monthly price increases since the beginning of the year, but it recorded a 7.2% decline in May, reaching $27,210 per coin. With further declines, the possible bearish momentum toward the $25,500-$26,000 range deserves a closer look. Near the lower boundary lies the 50-week SMA, which provided support during Bitcoin's decline in May.

Ethereum failed to stick to levels above its 50-day SMA and fell back to $1,850. The key technical support lies at $1,800. A fall below these areas for Bitcoin and Ethereum could trigger a broader cryptocurrency sell-off.

As bullish sentiments show signs of waning, more investors may lose confidence or join the sell-off. A market in consolidation may bore investors. When evaluating the market over a sufficiently long time frame, historical retracement data becomes crucial and can challenge investor sentiment, which tends to be cyclical.

Over the past 14 years, the highest average return for Bitcoin prices was around 38% in November. This was followed by 36% in April and 26% in October. Similarly, the first and fourth quarters have historically yielded the best returns for Bitcoin prices. A simple conclusion from this is that the first and third quarters are usually the best time to invest in cryptocurrencies.

Monthly returns on Bitcoin prices not only show the macro outlook but also add structure to the chaos of daily volatility.

Based on historical data and macroeconomic conditions, the outlook for Bitcoin prices is not optimistic. As a result, investors can expect a flat performance over the next three months. However, from a long-term investment perspective, the third quarter may provide an opportunity to add significant holdings of Bitcoin and other cryptocurrencies before the anticipated bull market rally in the fourth quarter of 2023.

Technical Analysis

After peaking at a 10-month high of $31,064 in mid-April, the Bitcoin price has been forming a descending structure of higher highs and lower lows. Despite this pattern, Bitcoin prices continued to rise after a two-week consolidation period. Currently, it has temporarily broken above its 50-day SMA but has retraced some of its gains.

Momentum indicators reflect a cautiously positive tone. Specifically, the Stochastic Oscillator is moving up around the overbought zone of 80, while the RSI is moving above the 50 neutral mark.

If the bulls manage to push prices higher, they could encounter immediate resistance near the 50-day SMA, currently at $28,140. A break above this range could see Bitcoin prices rise to the key psychological level of $30,000. And a break of that range could open the door to a 10-month high of $31,064.

Alternatively, bearish action could see prices test the recent double-bottom low at $25,785. Breaking below this level, the bears could target the resistance level of $25,250, which could act as support in the future. Even lower, the $21,375 handle could provide downside protection.

It is worth noting that the market has yet to fulfill our previous expectation of a significant upward move after breaking below the psychological level of $25,000. This raises the question of whether the price is testing the completion of wave 5 without destroying the wave 4 structure of upward impulse waves. Investors should pay attention to this possibility, as in Elliott Wave Theory, upward impulse waves cannot fall below wave 4.

Overall, the Bitcoin price is currently trying to break out of its short-term range-bound oscillation pattern to the upside without the prospect of a break below either wave 4 or wave 1. However, the 50-day SMA is limiting its gains. Therefore, a clear break of the latter is needed to revive the bulls' hopes for a trend reversal. It is recommended to buy the dips.

Trading Recommendations

Trading Direction: Long

Entry Price: 26900

Target Price: 37500

Stop Loss: 25000

Valid Until: 2022-06-15 23:55:00

Support: 26621, 25785, 25222

Resistance: 28487, 28979, 30015