The price of Bitcoin still has a lot room to drop below $30,000 before the bull market is in trouble.
Bitcoin (BTC)
has seen a massive surge in the past two months, in particular, as
institutions jumped into the new asset class. The latest is Blackrock, announcing interest in trading in Bitcoin futures while Grayscale continues to scoop up BTC at an accelerating pace.
However, after a massive surge, the asset’s price has to come down for some tests of support as investors take profit. This is the beautiful cyclical nature of supply and demand.
BTC/USD
is currently in a corrective phase since Bitcoin’s rally became
overextended above $40,000. The primary question is how far the
correction will go from here or whether the $30,000 level will be strong
enough to fend off the bears.
$30,000 must hold to stay bullish
The
daily chart for Bitcoin shows a tremendous rally in recent months.
However, some weaknesses are emerging since the recent high, after which
the price corrected by roughly 30%.
One of these weaknesses is
the continuing lower highs since the recent peak high at $42,000. These
lower highs are confluent with weaker bounces from the support area.
In
this case, the $30,000 area has held before. However, to the concern of
the bulls, the bounces from this area are getting weaker.
If the
$30,000 area doesn’t hold, a further correction toward $24,000 becomes
likely, which would mean a retrace of 40% since the recent highs.
Corrections are quite common in a bull market
This weekly chart shows the previous bull cycle from 2015 to 2017 highlighting some corrective phases.
First
and foremost, the 21-week MA (the orange line) is an important
indicator for the bull cycle to continue. As long as the price of
Bitcoin sustains above this 21-Week MA, the bull cycle is ongoing.
Traders
and investors should be aware of the fact that nothing goes up in a
straight line. Corrections are healthy and organic for the markets to
occur and could be used as an opportunity to buy the dip.
The
second important thing to note in this chart is the magnitude of the
corrections. During the previous bull cycle, there were multiple
corrections of 30-40%that were quickly bought up before the bull cycle
continued.
It is worth noting that altcoins could see more downside as they are less liquid and hence, always more volatile than Bitcoin.
Therefore,
the ultimate end of the correction could occur toward the 21-week MA.
This indicator is currently moving around the previous all-time high at
$20,000. However, it’s a lagging indicator, and corrections don’t happen
within one week, meaning the 21-week MA would continue to go even
higher in the meantime.
One possible scenario is the 21-week MA
moving around the $24,000-26,000 in a few weeks from now. Such a
correction would also be 30-40%.
Total market cap may retest previous all-time high
The total market capitalization chart is a great chart to watch during corrections.
While
the likelihood that Bitcoin will retest its previous all-time high is
very small. However, the likelihood that the total market capitalization
will test its previous all-time high is significant.
This retest
would put the 21-week MA of the total market cap chart around the level
of $750 billion, an important confluence with the 2018 all-time high.
Therefore, investors and traders should be watching the $750 billion
zone as crucial support for a potential bounce in the cryptocurrency
market.
The views and opinions expressed here are solely those of the author
and do not necessarily reflect the views of Cointelegraph. Every
investment and trading move involves risk. You should conduct your own
research when making a decision.
source link : https://cointelegraph.com/news/why-did-bitcoin-fall-below-33k-coinbase-whales-might-have-the-answer
