Can El Salvador save Bitcoin price from a brutal crash to $12,500?

Bitcoin price has been in a pickle since the start of 2022, be it the Terra-Luna debacle, Three Arrows Capital implosion or the latest collapse of the FTX exchange. Bullish news has been rare for the big crypto, or so we thought. 

Nayib Bukele, the president of El Salvador, announced earlier on Thursday that the Central American country will initiate a BTC buying program starting November 18.

El Salvador helped Bitcoin reach all-time high last year

El Salvador’s most relevant appearance in crypto headlines was when it accepted Bitcoin as a legal tender on September 2021. Due to the market conditions, Bitcoin price dropped 23% in the subsequent three weeks or so but rallied a whopping 70% soon thereafter and hit a new all-time high of $68,789 on November 10, 2021. 

If history were to repeat this time, a bullish outlook for the cryptocurrency ecosystem and Bitcoin could be around the corner. However, technicals do not seem to be as forgiving as one would expect and are forecasting a brutal sell-off. As a result, a minor bounce followed by a nosedive could be in the works for BTC.

Bitcoin price and its bearish outlook

Bitcoin price shows what everybody has been dreading, a bearish continuation pattern. This setup is known as a bearish pennant and contains a massive crash followed by a consolidation in the form of a symmetrical triangle. 

The target for this technical formation is obtained by measuring the 23% Bitcoin price crash noted between November 8 and 10 and adding it to the breakout point at $16,352. Although BTC has not breached the pennant to the downside, the target based on this measurement technique is $12,490.

This target is definitely not a surprise considering our previous publications forecasting a macro bottom between $11,989 and $13,575. What may, however, catch traders off guard would be the buy-stop liquidity run above $17,200. 

Traders should prepare for a quick liquidity grab above the said level before any major move the downside begins.

BTC/USDT 1-day chart

Institutions announce their FTX losses one-by-one 

Adding credence to the bearish outlook is the Singapore's government-owned holding Temasek announcement on November 16 to write down its $275 million investment in FTX. Considering how big the now-defunct exchange was, more institutions are likely going to come out of the woodwork and could trigger another sell-off.

Genesis’ lending division is also in trouble as it halted customer redemptions and new loan originations on November 16. This has caused widespread panic among investors, triggering a 3.5% downswing in Bitcoin price.

As a safe play, investors and traders should consider withdrawing funds from centralized exchanges and look into self-custody to prevent the spread of the ongoing contagion.

Regardless, the bearish outlook detailed above will only face invalidation if Bitcoin price produces a decisive flip of the highest trading volume level of 2022 at $19,011. In that case, a shift in the narrative could attract enough sidelined buyers to catalyze a bullish move to tag the $20,000 psychological level.