Bitcoin price has accelerated enormously in recent months, with Bitcoin (BTC) from $ 10,000 to $ 41,500. This rally went vertical without major corrections in between.
However, each upward cycle has its default 30% corrections, which can even be considered healthy for more upside potential.
The price of Bitcoin started to decline south in recent days when it fell 25% to $ 30,000. This decline was also impacted by the sudden rise in the US dollar, which could bottom out in the near term.
Bitcoin price is turning bearish on lower timeframes
A trend reversal starts with lower timeframes turning bearish, and this chart is an example of such a trend reversal. The USD 38,900 support was lost after multiple testing.
That in itself is not bad. But when the support level turns bearish into resistance, that’s likely to cause a downward continuation.
A similar support / resistance reversal occurred in the USD 36,300 area, after which the price accelerated down towards the USD 32,500 and USD 30,000 support areas. Traders and investors should remember that downward corrections almost always take place in a quick and painful motion.
However, support appears to be found at $ 30,000, which may trigger some range-bound constructs for now. Such a range-bound construction is healthy for the markets, because power can be built up for the next impulse wave. This impulse wave will most likely occur with a later phase in 2021.
Fibonacci coincides with the current support levels
The 3-day chart shows confluences in the interest of Bitcoin investors. Overall, the previous all-time high of $ 20,000 would be a great gift to the entire market. However, above this latest all-time high, other levels are found that are likely to be formidable support.
These levels are aligned with the Fibonacci indicator. The first significant level of support is found in the region between USD 29,500 and USD 30,500. This is the level at which the price of Bitcoin is currently finding support.
From here, a relief to $ 35,000 to $ 37,000 could occur before another final dip begins.
That last dip could be in the region’s direction between $ 25,000 and $ 26,000 as that’s the next Fibonacci level.
Dollar bounces off market weakness
One of the main variables for this recent correction in the crypto and equity markets is the strengthening of the US dollar. The dollar Strength Index (DXY) landed at a significant support level, marking a temporary low with a daily bullish divergence.
Since then, the dollar has rallied, causing other inversely correlated markets to fall south.
The first resistance area is built around the 92 point level. This area of resistance would automatically mean that other markets could correct further.
The ultimate level of support to watch
The ultimate level to be aware of for bitcoin traders is the weekly time frame, i.e. the 21 week long verage. In 2016 and 2017, Bitcoin’s price rested on this moving average as support throughout the bull cycle.
It’s not unlikely that a similar test will take place in the coming months, and it would suit the likelihood of some consolidation before continuing. However, investors don’t have to worry at all about the current value of the 21-week MA. However, it is a lagging indicator, meaning it will creep into the USD 25,000 area in the coming weeks.
That region would mean a correction of around 40% for the crypto markets, which has also happened more than once in past bull cycles for new highs.
The views and opinions expressed here are solely those of the writer and do not necessarily reflect Cointelegraph’s opinion. Every investment and every trade move carries risks. You should do your own research when making a decision.