Bitcoin’s recent rally has improved the overall sentiment among market participants. This change of scene has spurred a positive momentum across the industry as signs of a bull market start popping.
Technical Analysis
By Shayan
The Daily Chart
The $25K price region has been the most significant barrier in Bitcoin’s path during the last eight months. Most recently, the price attempted to surpass this level and failed, resulting in a consolidation correction stage.
However, after an impulsive surge, a correction phase is essential for the continuation of the rally, which usually is simultaneous with the formation of the pullbacks.
Hence, the recent plummet can be considered a correction phase to form a pullback to the broken descending trendline, flushing out over-heated futures market positions and initiating another spike.
Nevertheless, the $21K price level and the 50-day moving average, currently at $20.3K, are the primary support levels and could act as the next target for the recent decline.
The 4-Hour Chart
On the 4-hour timeframe, the price began a slight bearish leg after being rejected from the $25K substantial resistance region and grabbed sell-stop orders below the $22.3K minor support level.
Typically, the price tends to grab sell-stop orders below support levels during the correction stages of a bullish rally before continuing to surge.
Furthermore, following the recent plummet, the price has reached a significant support region, consisting of the $21K support level and Fibonacci’s decisive levels between 0.382($21,604) and 0.5($20,785).
As a result, BTC faces substantial support and seems likely to start another bullish leg in the upcoming days.
On-chain Analysis
By Edris
Bitcoin’s recent price rally has made many investors believe that the bear market is finally over. Holders who have been underwater for the last few months are back in profit again. However, there are still some caution signs, as this increase could be another bull trap during the bear market.
This chart demonstrates the short-term holders’ SOPR metric, which measures the ratio of profits realized by the market participants who have bought their coins in the last six months. Values below one indicate losses, and values above one are associated with profits being realized.
Following the rally over the last couple of weeks, the short-term holders who have accumulated BTC at lower average prices realized their profits.
Although profit taking is not necessarily a negative sign, but this metric has reached values previously seen at the $69K all-time high. If this selling pressure does not meet demand, the correction might continue.
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Cryptocurrency charts by TradingView.
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During today’s trading session, the price of Bitcoin (BTC) dipped below $22,000, declining all the way to $21,750 on some exchanges. This marked the lowest level for Bitcoin’s value since the cryptoasset rallied from $17,159 to hit an all-time high of $24,930 less than two weeks ago.
Despite the bearish sentiment that has been seen in the market, analysts believe that BTC could be preparing for another push higher. The leading cryptocurrency has gained over 17% since January 1st and, in spite of the recent bearish action, the underlying trend for Bitcoin has been overwhelmingly bullish since October 2020.
Moreover, the 70-day moving average of Bitcoin’s price has been rising consistently since March of this year, showing that there is a strong demand even when short-term pullbacks occur. The moving average as of now stands at $18,000, suggesting that any selling pressure is likely to lead to renewed buying at far lower prices.
Consequently, many traders consider this latest dip in Bitcoin to be a buying opportunity that could lead to gains over the long-term. Technical indicators remain positive and even if short-term short-term selling pressure persists, bullish sentiment is expected to return in the days ahead.
Analysts have also noted that the correlation between Bitcoin and stocks has weakened, indicating that investors may be more inclined to invest in digital assets over traditional securities. This suggests that Bitcoin may be better able to continue its rally without the influence of other asset classes.
At the time of writing, BTC is trading at $22,250, down from its all-time high of $24,930 but up from its intra-day low of $21,750. If the bulls can regain control of the market, Bitcoin could potentially set a new all-time high in the near future.
