FX.co ★ Bitcoin could fall to zero in theory

Bitcoin and Ethereum continue a correction that traders have been preparing for weeks. Recall that the two most important recent events for the crypto world were more negative than positive. Central banks (notably the Federal Reserve) have begun tightening monetary policy, which increases demand for safe-haven assets rather than Bitcoin. The Clarity Act remains only a bill. If the Democrats win control of the US Congress, there's a good chance the bill will never become law. Thus, the fundamentals for further growth in the crypto market remain questionable. We do not deny that the asset can rise under any news backdrop — the recent dollar rally is proof of that. However, at this time there are no technical signals aside from a potential deviation on the 4-hour timeframe.

Meanwhile, Chamath Palihapitiya, a Facebook executive, warned that investors could start to massively dispose of "digital gold," and that Bitcoin could collapse to zero if its network is broken by quantum computers. Over the past year, concerns about Bitcoin's future have repeatedly arisen because quantum computing power is steadily increasing, and sooner or later there may come a moment when Bitcoin is directly threatened by a hack. In addition, the development of artificial intelligence could speed up and simplify the search for vulnerabilities and attacks. Some experts now say Bitcoin is not at risk of being broken in the next few years. However, even today, AI can be used to compromise individual wallets.

For investors, it does not matter much whether the hack would target the entire network or just their wallet. If a real threat of fund loss arises, that could indeed trigger mass selling of the leading cryptocurrency and its "younger siblings." Mr. Palihapitiya also doubted that Bitcoin developers would be able to implement quantum protection mechanisms for the blockchain in time. "Bitcoin needs protection from quantum hacking. But in the crypto community, people can't even agree on much simpler issues. I think Bitcoin will eventually be hacked," Palihapitiya believes.

Trading recommendations for BTC/USD

Bitcoin is showing signs of the start of a new "bull" trend. This trend began, as often happens, with a pump that had no specific, clear reasons. The Federal Reserve has not started cutting rates, and the Clarity Act has not been passed. However, in the near term, Bitcoin may be in decline on the daily timeframe, since the price reacted to the last two bearish FVGs and formed an order block. Traders should also note that a breakout of the sideways channel on the daily chart may be a deviation — yes, a deep deviation, but a deviation nonetheless. If so, Bitcoin could head for the $70,800 level and even maintain the downtrend that began last year. We believe short positions are the most relevant in the near term. A deviation of the lower band of the sideways channel on the 4-hour timeframe will keep Bitcoin in a flat range for some time. A breakout of the 4-hour channel would allow a move toward $70,800.

Trading recommendations for ETH/USD

On the daily timeframe, the technical picture for Ethereum has completely changed. Ethereum is now looking toward a new uptrend. However, bulls can only draw support from the weekly chart, where Ethereum has set course for $4,800 — the upper band of a five-year sideways channel. On the daily timeframe, the first bearish FVG did not produce a noticeable price reaction for Ethereum, whereas Bitcoin reacted to its own FVGs, and we recall that Ethereum's price is about 80–90% correlated with Bitcoin. As Bitcoin began its correction, Ethereum also went down. Therefore, we expect a decline in the near term. Targets for Ethereum are around $2,300 and lower, down to $1,850 and $1,391. On the daily timeframe, Ethereum received a sell signal from the nearest FVG. Multiple sell signals were formed for Bitcoin, so Ethereum does not even need its own signals to move down. We only need to wait for Bitcoin to exit the 4-hour flat range...

Comments on the charts

CHOCH is a change of character / break of the trend structure. Liquidity means traders' Stop-Losses that market makers use to build their positions. FVG stands for a Fair Value Gap (area of price inefficiency). The price often moves quickly through such areas, indicating the absence of one side in the market. Later, the price tends to return and react to these zones. IFVG is an Inverted Fair Value Gap. After a return to such a zone, the price does not react but impulsively breaks through and then tests it from the other side.

OB means an Order Block. A candle on which a market maker opened a position in order to harvest liquidity and then form their own position in the opposite direction.