Bitcoin price dropped below $48,000 in a major correction on Monday right before the U.S. market open.
Bitcoin’s (BTC)
price has been grinding up nicely over the past few weeks, but the past
24 hours have seen a significant correction. BTC price dropped by over
$10,000 from $58,000 to under $48,000, a correction of almost 20%.
This pullback — which many anticipated as 28,000 BTC was deposited to Gemini — also caused other cryptocurrencies to fall alongside Bitcoin, resulting in Bitcoin's market dominance rising as a result.
But will history repeat and produce a dull, corrective March? Let's analyze the charts.
Bearish divergence implying further downside to come
Markets
never go up in a straight line, and corrections must occur from time to
time. This can be considered a "reset" for the market, which reverts
back to the mean trendline, and the euphoria fades.
At the first
stage of a correction, people still expect the corrective move to be a
tiny correction, while the sentiment slowly starts to shift. The moment
the correction continues, the lower the price goes, the worse the
sentiment becomes.
At the bottom, Bitcoin will be called "dead" and a Ponzi scheme once again, after which the price has historically recovered.
The
critical question now, however, is whether the market will see a
prolonged correction or if Bitcoin’s price will hold above the green box
shown in the chart above. That green box is the previous period of
compression that technically should serve as major support.
If the area between $42,000 and $44,000 holds, upward continuation is likely. In that case, the point of interest at $63,000 is still on the table.
However,
the bearish divergence and the weakness at the start of this week
suggest more downside is possible. In that regard, losing the
$42,000–$44,000 area could result in a further correction toward
$37,000.
March historically isn’t a bullish month
The
weekly chart for Bitcoin shows some beautiful historical data, which
shows that March tends to be a period of correction or consolidation.
Massive corrections happened in 2017, 2018 and 2020 during this period,
while 2016 and 2019 saw sideways price action.
Of course, history
is not guaranteed to repeat, but history rhymes, and historical data
often provides insight into how market cycles work.
In that
regard, the critical indicator to watch is the 21-week moving average
(MA), which should hold Bitcoin’s price from dropping further. From that
perspective, the current price level of the 21-week MA is found at
$28,000, and this will crawl up to $32,000 to $34,000 in the coming
weeks.
Thus, the recent higher low is created at $30,000, which
means that a further drop toward $38,000 to $40,000 is not unlikelym as
that would be a regular 30% to 40% correction.
Critical levels to watch for Bitcoin
The
daily chart of Bitcoin shows some critical levels to watch for the
current period. First of all, the recent drop-down brought Bitcoin’s
price to a vital support level. It should hold this zone between $42,000
and $44,000 to avoid more downside.
If this doesn’t hold, a further drop to the level around $37,000 is likely. This would also grant a retest of the 21-week MA.
However,
if the green zone between $42,000 and $44,000 does provide support, a
rebound is likely toward $63,000, as previously stated.
However,
this is too early to call, as historically, the end of February and
March is a corrective, not a bullish period for the markets in general.
source link: https://cointelegraph.com/news/bitcoin-price-crashes-below-48k-but-is-the-bull-market-in-danger
