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After bitcoin’s move towards $45K turned into a fakeout as BTC got sharply rejected, the recent price action turned short-term bearish, with a critical level to watch at $40K.
The uncertainty and the low liquidity status in the crypto markets have led to a volatile period that is also highly correlated with the global markets. Fundamentals such as the Ukraine – Russia conflict affect both global and the crypto markets.
Following two disappointing weekly candles, Bitcoin eyes this week’s candle close, at what could turn into a critical moment in case of a close below the critical support.
Technical Analysis
By: Shayan
Long-Term
The bitcoin price was rejected at the multi-month resistance descending trendline (marked blue on the following chart).
On Thursday, Feb 17, bitcoin dropped below the critical moving averages – 50 and 20-day MAs – showing that bears aren’t about to give up and are selling during rallies to exit the market.
In addition, the price failed to form a higher high on the daily time frame, which was essential for a reversal scenario. BTC is currently trading above the $38-39K support, along with the ascending yellow trendline, hence, we can expect two possible scenarios from here:
- Bullish: BTC consolidates around the $40K area and breaks above the blue trendline. If the price bounces off the present level, bulls have to push the price above the 20 and 50-day moving averages. In that case, we can expect a break above last week’s high at $45.8K.
- Bearish: BTC will break down below the yellow trendline and the support area, heading towards lower levels. Given the values of the RSI, there is much room for bitcoin to decline and form a new local low, which will also create a lower low (bearish trajectory).
Short-Term
The bitcoin price has dipped since forming a double top pattern on the 4-hour time frame (shown below). As mentioned above, the price is still trading above the support zone of $38K-$39.2K, as well as the ascending trendline (the yellow line).
One likely scenario is a break below the mentioned support, then hitting lower price levels, confirming the “Double Top” pattern. However, on the other side, if current support holds, Bitcoin is likely to retest the $45K area.
Futures Market Analysis
The recent significant surge towards $45K has re-established optimism across the market. The consequencing FOMO led many speculators to enter high-leverage long positions.
Then, the price got rejected at the $45K level yet again and had seen a quick 12% drop over the previous three days. This resulted in another cascade of long liquidations.
In addition to the massive liquidations event, based on price action patterns, many technical analysts identified the $41K – $42K zone as support, meaning that many stop losses were set below this level. As a result, when BTC fell below this level, a wave of stop losses was triggered, intensifying the bearish trend.
