Bitcoin Faces Bearish Market Structure After Significant Downturn
Following a notable downturn in the cryptocurrency market, Bitcoin has experienced a sharp decline, breaking through the crucial support level of its previous major swing low at $53K. This price movement suggests a potential shift towards a bearish market structure.
Technical Analysis of Bitcoin’s Price Movement
Analysis of the Daily Chart
Upon analyzing Bitcoin’s daily chart, it is evident that the recent downturn was influenced by widespread fears of potential economic instability. Increased selling pressure since Friday has led to a significant drop in BTC’s price, causing it to break below the 200-day moving average at $61.1K and the previous major swing low at $53K.
- This breakout below key support levels indicates a strong bearish signal, pointing towards a potential shift in market structure towards bearish territory, as it establishes a new lower low on the daily timeframe.
- The movement suggests that sell-side liquidity, previously resting below the $53K level due to stop-loss orders from earlier long positions, has been activated, resulting in a long-squeeze event.
- With the perpetual markets undergoing cooling off and deleveraging, there is a higher likelihood of a mid-term consolidation phase. Therefore, Bitcoin’s price is expected to fluctuate between the $53K and $60K levels in the upcoming days.
Examining the 4-Hour Chart
Looking at the 4-hour chart, the intensity of the sell-off is apparent as Bitcoin’s price plummeted through critical support zones, including the psychological $60K level and the significant $53K mark.
- The sharp decline has resulted in the removal of most long positions in the futures market, leading to a temporary pause in bearish momentum when the price hit the lower boundary of a multi-month wedge pattern around $50K, causing a minor bounce back.
- Given the impulsive nature of the recent downtrend, the market may undergo a corrective phase in the near future.
- The key targets for this correction are within the Fibonacci retracement levels, specifically between the 0.5 ($62K) and 0.618 ($59.5K) levels. Bitcoin is likely to trade within the $50K to $62K range short-term, potentially consolidating sideways until the next significant movement occurs.
Insights from On-chain Analysis
Bitcoin’s price has observed a notable decline, struggling to sustain its upward momentum. One of the key reasons behind this recent drop could be the selling activity in perpetual markets and a long-squeeze event.
- An important metric for gauging sentiment in the futures market is funding rates, which reveal whether buyers or sellers are executing more aggressively. Positive funding rates indicate bullish sentiment, while negative rates indicate bearish sentiment.
- Recently, the funding rates have plummeted sharply, signifying that the decline was fueled by aggressive short selling and the liquidation of numerous long positions.
- The negative funding rates indicate an overall bearish sentiment and the prevalence of short sellers. However, this could also indicate a positive development, signaling that the futures market is no longer overextended. This situation could pave the way for a more sustainable bullish trend in the coming months, barring any drastic changes.
Hot Take: Bitcoin Navigates Bearish Terrain Amid Market Uncertainty
As Bitcoin grapples with a shift towards a bearish market structure following a significant downturn, investors are closely monitoring key support and resistance levels to gauge the cryptocurrency’s future price trajectory. The recent sell-off, driven by fears of economic turmoil, has ignited a wave of volatility in the market, prompting traders to brace for potential consolidation and corrective phases in the near term.
By
By
By