When I clearly drew a complete head and shoulders pattern on the Bitcoin candlestick chart over the weekend, my coffee cup nearly slipped from my hand.
As an analyst who has immersed myself in the crypto market for years, I must speak the unsettling truth: the Bitcoin chart is issuing the strongest bearish signals since 2021. For the past few months, we have relied on that solid uptrend line as psychological support, but this week's price action has ruthlessly broken through it.
More concerning is that a large-scale head and shoulders pattern is forming on the daily level—this is not an ordinary pullback but may mark the end of the uptrend. If you are still considering ‘bottom-fishing,’ please read this article first.
01 Market status: Dual pressure from technicals and capital flow
Today's Bitcoin price is trading in the $85,000 to $86,500 range, significantly retreating from previous highs. Market sentiment is clearly bearish, not just due to technical breakdowns.
On-chain data shows that long-term holders (those holding for over a year) are selling Bitcoin at a rare speed in recent years. Meanwhile, there is a continuous net outflow of funds from the U.S. spot Bitcoin ETF, with weak institutional demand becoming a significant drag on the market.
Technical indicators are fully bearish. The one-hour chart shows that the Bitcoin price has fallen below the support of the short-term uptrend line around $87,250 and is running below the 100-hour simple moving average. The hourly MACD indicator is in the bearish zone below the zero line and is accelerating downward.
Key support is in the $84,000-$85,000 range, which is widely viewed as a critical turning point for determining short-term direction. If this support area is effectively broken, the downward momentum may accelerate, opening up space toward $83,200 or even lower levels.
02 Bearish confirmation signal: Head and shoulders pattern and trend line breakdown
The daily level closed with an upper shadow bearish candle accompanied by high volume, clearly confirming that the current market's dominant force is bearish. This ‘high-volume drop’ pattern indicates that each rebound encounters strong selling pressure, with bears holding an absolute advantage in intraday trading.
The head and shoulders reversal pattern is one of the most reliable bearish formations in technical analysis. Currently, this pattern is forming on the Bitcoin daily chart, with the right shoulder nearly completed, and the neckline facing severe testing. Once the neckline is decisively broken, the measured decline may be considerable.
More concerning is the effective breakdown of the upward trend line that has persisted for months. This trend line, extending from the early 2025 lows, had previously supported prices multiple times, but this week's decline has completely lost it. The break of the trend line indicates that the market structure has shifted from bullish accumulation to heavy distribution.
From a time cycle perspective, December is typically a traditionally weak month for the cryptocurrency market. Combined with the dual blow from the technical side, risk-seeking investors should consider reducing positions near resistance levels during rebounds, rather than blindly bottom-fishing.
03 Is there a glimmer of hope hidden in the on-chain data?
Although the technicals are frustrating, the on-chain data presents an interesting contradictory picture. CryptoQuant's net flow data from Binance shows that since December, this indicator has remained negative, implying that even as prices decline, Bitcoin withdrawals still exceed deposits.
This pattern is worth noting: During the sell-off, there were multiple peaks of net outflow of 2,000 to 4,000 BTC; and every time the BTC price fell below a key level, the outflow of funds intensified. This pattern is similar to the previous accumulation phase—long-term holders quietly accumulated tokens during price corrections.
Ongoing withdrawals from exchanges usually indicate reduced selling pressure on the spot market, as cryptocurrencies enter cold storage rather than flowing back into the market. This dynamic suggests that recent adjustments may be driven by derivative leverage liquidations and trend-based sell-offs, rather than sustained spot selling pressure.
However, positive signals from on-chain data cannot offset the technical weakness. The daily downtrend is likely to continue until clear bottom reversal patterns (such as a volume bullish engulfing) appear.
04 Risk environment and macro pressure
The cryptocurrency market is currently facing a complex macro environment. The Federal Reserve is sending cautious signals, and the interest rate path is flattening.
In addition to the lack of short-term driving factors, new structural risks have emerged. MSCI is reassessing the index eligibility for digital asset financial companies, and companies with over 50% exposure to cryptocurrencies may be excluded. This policy change could impact institutional capital inflows.
At the same time, seven associations, including the China Internet Finance Association, recently issued a risk warning, urging the public to remain highly vigilant about various forms of virtual currency and real-world asset token business activities. Such regulatory dynamics usually increase short-term uncertainty in the market.
The hidden leverage in decentralized financial systems also poses potential risks. The cryptocurrency market crash on October 11, 2025, liquidated over $19 billion in positions within just a few hours, highlighting the fragility of high-leverage markets during price fluctuations.
05 My trading strategy and position management
In light of the current market environment, my personal strategy has shifted to defense:
Trend-following shorts are dominant: Any rebound toward key pressure zones is an opportunity to lay out shorts. Key resistance is in the $86,681-$87,384 range (1-hour core pressure zone), with stronger resistance at $88,000 (4-hour level strong pressure).
Strict stop-loss rules: Short positions should have a stop-loss set above $89,350 to prevent losses from false breakouts. The Bitcoin market is known for its high volatility, and stop-loss is the first rule of survival.
Staggered layout strategy: Enter lightly in the pressure zone around $87,384, and if the rebound strength exceeds expectations, consider $89,000 as a secondary entry point. Staggered layouts help optimize the holding costs.
Focus on the risk-reward ratio: Ensure that the potential risk-reward ratio for each trade is greater than 1:1.5, and clarify plans before entering. In the current market environment, risk control is more important than pursuing profits.
For bulls, the wisest strategy may be to remain patient and wait for prices to stabilize above $87,000 and form higher lows before considering gradually building positions. Maintaining a wait-and-see approach is the best choice until the market gives a clear reversal signal.
The development of quantum computing may pose a potential threat to future encrypted assets, but the current market risks are already sufficiently real. The struggle in the $84,000-$85,000 range will determine the short-term direction, while further support is around $83,200.
The market will never lack opportunities, but capital is only available once. When direction is unclear, preserving funds is wiser than chasing volatility. Regardless of how the market changes, maintaining rationality and controlling risks is always the first priority in investing.#巨鲸动向 $ETH
