According to Valkyrie Investments’ technical analysis, Bitcoin (BTC) may be able to recover its recent price drop.

This month, the leading cryptocurrency in terms of market value fell by 10%, to $26,200, due to the renewed hawkish Fed betting, the recovery of the dollar index and the uncertainty surrounding the U.S. Debt Ceiling.

Valkyrie predicts that bitcoin’s Ichimoku cloud (a momentum indicator) on the daily chart has turned bearish.

The Ichimoku Cloud was created by Goichi Hosada, a Japanese journalist in the late 1960s. The indicator consists of five lines: Leading Spans A and B, Conversion Lines or Tenkan-Sens (T), Base Lines or Kijun Sens (K), and a lagging price line.

Clouds are formed by the difference between Leading Spans A and B. They can be used to identify broader trend. A bullish cloud will be green while a negative one will be red. To identify short-term signals, traders use the crossovers between Tenkan-Sen (a nine-day mid-point) and Kijun Sen (a 26-day mid-point), which is a price midpoint.

Chart below shows green Ichimoku clouds, which indicate a positive outlook. The price of the cryptocurrency has fallen recently back into the cloud and the Tenkan Sen (blue line), has crossed below Kijun Sen (red line), which confirms a bearish cross.

In a note sent to clients, Valkyrie’s analysts, led by Chief Investor Steven McClurg wrote: “This suggests a continuing high-timeframe bearish trend, with a declining bullish momentum, and the potential of near-term retrenchment.”

(Valkyrie Investments) The price of cryptocurrency has dropped back to the clouds. (Valkyrie Investments) (Valkyrie Investments)

The bitcoin price bounced to $31,000 in mid-April after the early March pullback.

A price that is close to the edge of a cloud suggests that cloud support has been lost and could trigger a move towards the lower [opposite] edge. Analysts added that in this case an Edge-to Edge trade would result in prices of around $24,000.

Sam Reynolds is the editor.