The Clarity Act was rejected in the U.S. Senate on Tuesday, leading to a sharp drop in the Bitcoin price down to $75K. A 25 bps hike is expected to be announced in the Federal Reserve FOMC meeting later on Wednesday. While the effects of this are probably already baked in, market reaction could decide whether Bitcoin falls further.

Parallel channel breaks to the downside

Source: TradingView

Following the failure of the Clarity Act vote in the U.S. Senate, the $BTC price fell out of the parallel channel and dropped as far as $75K before rebounding slightly. The price looks to have found a base on the $75,600 horizontal support level, where it also wicked down to near the start of the parallel channel.

As Wednesday unfolds and the time gets closer to the Federal Reserve announcement on interest rates at the FOMC meeting, there is likely to be some ups and downs in price. What is likely is that at some point the $BTC price comes back to test the bottom of the channel, which is also the neckline of a head and shoulders pattern. 

A rejection would seem the more likely scenario, but the market is often an unfathomable creature, and if the market decides (Fed Chairman Warsh willing) that it now has a lot more certainty going into the end of the year, the general uptrend could well continue.

$BTC price back to confirm channel and head and shoulders breakdown?

Source: TradingView

In the daily chart it can be observed that the $BTC price is on the brink of the next step down. As already stated, there is the probability that the price will head back up to the bottom of the channel, given that it was an important support level which could now be confirmed as resistance.

If we take the scenario that this is now the beginning of a collapse, $73K is that next step. Would the price stop there? Possibly, but the measured move out of the head and shoulders pattern would take the $BTC price down to $70,500K, and this has confluence not only with the 200-day SMA, but also the 0.618 Fibonacci level taken from the bottom of the rally to its top.

At the bottom of the chart, the Relative Strength Index (RSI) is showing a steady decline for the indicator line. A trendline has formed above, and so for any substantial positive price action to take place, the indicator line will probably need to break above the trendline. This will need to be watched closely.

Which support level?

Source: TradingView

Looking at the macro time frame of the weekly it really has to be said that further downside does look more likely than not from here. So where could the $BTC price go in the next few weeks? It may not even take weeks to get there. If this current support level at $75,600 fails, the collapse could start to pick up steam. 

There is a good support level at $73K. While bears might consider this as too shallow a dip, it does tie in with the 0.382 Fibonacci level, which considering the size of the previous rally, could be a bullish level for a bounce.

$69K is the next big level down, which is a good, strong level of support, while if we are going to have a real smack-down, then $65,700 is probably the strongest level of all. 

Towards the end of the day’s play on Wednesday we may have a better idea of where the price is going, and the weekly close would probably be even more enlightening. These are anxious but exciting times for Bitcoin holders.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Source: Crypto Daily