Bitcoin price may see a relief bounce first before retesting the $30,000 support.
Bitcoin price has been accelerating massively in recent months, with Bitcoin (BTC) rallying from $10,000 to $41,500. This rally went vertical without any major corrections in between.
However, every upward cycle has its standard 30% corrections, which can even be considered healthy for more upside.
Bitcoin’s price started to fall south in the past days as it dropped 25% to $30,000. This dropdown was also influenced by the U.S. dollar’s sudden surge, which might be bottomed out in the short term.
Bitcoin price flips bearish on lower time frames
A trend reversal starts with lower time frames flipping bearish, and this chart is an example of such a trend reversal. The $38,900 support was lost after multiple tests.
That’s not bad in itself. But when the support level flips bearish into a resistance, that’s likely to trigger continuation downward.
A similar support/resistance flip occurred at the $36,300 area, after which the price accelerated downward to the support areas at $32,500 and $30,000. Traders and investors should remember that downward corrections almost always occur in a fast and painful move.
However, support seems to be found at $30,000, which can induce some range-bound constructions for now. Such a range-bound construction is healthy for the markets, as strength can be built for the next impulse wave. This impulse wave will most likely occur at a later stage in 2021.
Fibonacci confluences with the current support levels
The 3-day chart shows confluences on the levels of interest for Bitcoin investors. In general, the previous all-time high at $20,000 would be a tremendous gift to the entire market. However, above this last all-time high, other levels are found and will likely be formidable support.
These levels are aligned with the Fibonacci indicator. The first significant level of support is found in the region between $29,500 and $30,500. This is the level where Bitcoin’s price is currently finding support.
From here, a relief bounce toward $35,000 to $37,000 could occur before another final dip starts.
That final dip could be toward the region around $25,000 to $26,000, as that’s the next Fibonacci level.
Dollar bouncing signaling weakness across markets
One of the primary variables for this recent correction across the crypto and equity markets is the strengthening of the U.S. dollar. The dollar strength index (DXY) landed on a significant support level and marked a temporary low with a daily bullish divergence.
Since then, the dollar has been rallying upward, causing other inversely correlated markets to drop south.
The first area of resistance is constructed around the 92-points level. This area of resistance would automatically mean that other markets could correct further.
The ultimate support level to watch
The ultimate level to watch for Bitcoin traders is the weekly time frame, which is the 21-week moving verage. In 2016 and 2017, Bitcoin’s price rested on this moving average as support through the entire bull cycle.
It’s not unlikely to have a similar test happen in the coming months, and it would suit with the likelihood of some consolidation before continuation. However, investors shouldn’t be worried at all about the current value of the 21-week MA. It’s a lagging indicator, however, which means it’s going to crawl up in the coming weeks toward the $25,000 area.
That region would mean a correction of around 40% for the crypto markets, which is also something that has happened more than once in previous bull cycles before new highs.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.