Negative Selling Pressure
The recent drop in the bitcoin market and the approval of Spot Bitcoin ETFs have contributed to a period of negative movement for bitcoin. The selling pressure from the Grayscale ETF and the upcoming release of a significant portion of the Mt Gox bitcoin to creditors have created an unfavorable environment for a price increase in the near future.
Short Term Bounce is Due
However, market movements are rarely linear. Bitcoin is approaching oversold territory, suggesting that a short-term bounce may be imminent, at least from a technical perspective.
Source: Trading View
Examining the daily chart, it appears that the decline in bitcoin’s price has slowed down as it found support at around $39,000. The price is currently hovering around $40,000 and may attempt to retest the trend line break at the resistance level of $41,000.
A Respectable Correction is Needed
While it is possible for bitcoin to break back above the trend line and resistance, a healthy bull market typically requires a significant correction. In previous bull markets, corrections of around 30% have been common. Currently, bitcoin has experienced a 21% dip from its recent high of $49,000. A correction of 30% would bring bitcoin down to the strong support level of $34,000, which aligns with the 0.618 Fibonacci level.
In more extreme scenarios where market sentiment becomes highly negative, bitcoin could retrace all the way back to the strong price structure at $30,000, resulting in a nearly 40% correction. This would essentially reset the market for the next major upward move.
Hot Take: Further Retracement Expected, with Potential Support at $34,000
In conclusion, while bitcoin may experience a bounce in the short term, it is likely that the retracement will continue over the next few weeks. A key level of support to watch is $34,000, where bitcoin could potentially reverse its downward trend and resume its upward trajectory.
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