The iShares Bitcoin ETF (IBIT) stock price has moved sideways this week as BTC stalled. IBIT was trading at $64.90 on Wednesday, down by 6.8% from its highest point this year. This article explains why the $85 billion fund is at risk of a short-term pullback.
IBIT ETF stock has formed a risky pattern
One top reason why the IBIT stock price could be at risk is that it has formed the highly bearish double-top pattern on the daily chart.
It formed the double-top at $69.75 and a neckline at $63.95, it lowest point this month. The price target in this pattern is estimated by measuring the height, and then extrapolating the same distance from the neckline. In this case, measuring this distance gives it a target price of $59.50.
The other bearish case is that the IBIT stock price has formed numerous bearish patterns. For example, the two lines of the MACD indicator peaked at 2.95 on May 23 and has been in a downtrend since then. Similarly, the Relative Strength Index (RSI) has been in a strong downtrend and recently moved below 50.
Therefore, these bearish divergences point to more downside in the next few weeks.
Bitcoin price has formed a risky pattern
The other main reason why the IBIT stock price may be about to crash is that Bitcoin could be at risk of a multi-month slump if technicals work out properly.
The weekly chart shows that the IBIT ETF has formed a rising wedge pattern whose two lines are about to converge. This pattern links the highest and lowest swings since August last year.
The distance between the widest part of the wedge pattern is about 42%. Therefore, this pattern points to a drop to $60,000 over time. While a drop to that level may not happen, the most likely scenario is where it falls from the current $113,820 to about $90,000.
Federal Reserve interest rates
The other potential risk that the IBIT ETF faces is that the Federal Reserve is in a bind as the United States stares at a stagflation, a period characterized by high inflation and slow growth.
Recent data showed that consumer and producer inflation have remained higher than the Fed target of 2.0%. The headline Consumer Price Index rose to 2.7% in July, while the core CPI jumped to 3.1%’
Another report showed that the headline and core producer price index rose to 3.6%, a sign that Donald Trump’s tariffs are having an impact on the economy m
More data revealed that the American economy was slowing, with hiring having stalled. The economy created just 73,000 jobs in July, and an average of 35,000 in the previous two months.
Therefore, the Federal Reserve will have to choose a side. It may opt to cut rates and boost economic growth or maintain higher rates to cool inflation.
Jerome Powell will likely talk about this situation in his speech at the Jackson Hole Symposium in Wyoming on Friday. A sign that he is ready to maintain rates steady will be bearish for Bitcoin and the IBIT ETF.
Summary
The IBIT ETF stock has done well in the past few months, helped by the strong Bitcoin performance. However, this rally has not been in a straight line and the token has experienced some pullbacks over time.
The coin may be on the cusp of another pullback in the coming weeks. Such a pullback may last for a fee months and then it will surge to a new all-time high later this year.
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