Bitcoin Nears Reversal Signal, 'Evening Star' Pattern Looms on CME Futures

Tony "The Bull" Severino, Head of Research at NewsBTC, identifies an "Evening Star" candlestick pattern on the monthly chart of Bitcoin CME futures, indicating a potential trend reversal. While the pattern suggests a possible decline, Severino cautions that Bitcoin could still reach higher highs before reversing. The analyst predicts a peak within the next two quarters, possibly in mid- or late Q3 2024.

Bitcoin Faces Potential Trend Reversal, Evening Star Pattern Emerges on CME Futures Chart

Tony "The Bull" Severino, Head of Research at NewsBTC and a certified CME, has identified an "Evening Star" candlestick pattern on the monthly chart of the Bitcoin CME futures. This formation, which traditionally indicates a potential trend reversal, is forming at a critical point for Bitcoin.

The Evening Star pattern consists of three candlesticks: a large bullish candle, followed by a small bearish candle, and finally a large bearish candle that closes below the midpoint of the first bullish candle. This pattern suggests that the upward momentum of the trend is waning and that a reversal could be imminent.

While the Evening Star pattern is present on the Bitcoin CME futures chart, it is not visible on the spot BTCUSD chart on ordinary charts from exchanges such as Binance or Coinbase. This lack of uniformity across charts has raised questions about the reliability of the signal.

Despite the potential for a reversal, Severino cautions that Bitcoin could still reach higher highs in the coming months before peaking and reversing. However, predicting the exact timing of these events is a challenge.

Based on candlestick analysis, Severino predicts that Bitcoin could peak within the next two quarters, possibly in mid- or late Q3 2024.

Technical Analysis: BTC Faces Resistance, Evening Star Formation Validity Uncertain

At the time of writing, Bitcoin is trading near all-time highs. Following a cool-off last week, the coin bounced back strongly over the weekend, erasing some losses. However, Bitcoin remains technically within a bearish breakout formation, trading below the 20-day moving average on the daily chart.

For the uptrend to continue and extend from the formation in the daily chart, BTC must push above $70,000. The validity of this uptrend will be solid if the leg up is accompanied by expanding trading volume.

Severino also notes that the Evening Star formation will be invalidated if Bitcoin closes strongly above $74,000 by the end of the month. Bitcoin prices peaked at around $73,800 in early March, buoyed by expanding demand, especially from spot Bitcoin ETFs.

Fundamental Factors: Spot Bitcoin ETF Outflows Pose Challenges

Despite the potential for a continued rally, some fundamental factors pose challenges to Bitcoin's upward momentum. Notably, outflows from spot Bitcoin exchange-traded funds (ETFs), particularly from the Grayscale Bitcoin Trust (GBTC), are rising. Rumors suggest that bankrupt crypto lender Genesis could be liquidating its GBTC holdings, adding further selling pressure to the market.

By March 22, spot Bitcoin ETF issuers had experienced outflows for five straight days, according to Lookonchain data. Nonetheless, as GBTC posts outflows, BlackRock's IBIT continues attracting more clients seeking BTC exposure.

The presence of the Evening Star pattern on the Bitcoin CME futures chart raises concerns about the potential for a trend reversal. However, the lack of uniformity across charts and the uncertainty surrounding the timing of any reversal make it difficult to draw definitive conclusions. Fundamental factors, such as spot Bitcoin ETF outflows, also pose challenges to Bitcoin's upward momentum.