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Here’s Why Bitcoin May Face a Harsh Correction Before It Can Rally Higher

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  • Bitcoin is in the process of stabilizing following the swift rebound it incurred overnight
  • This allowed the benchmark crypto to climb from lows of $11,150 to highs of $11,500, around which price it is now hovering around
  • Analysts are noting, however, that there is a path forward for the cryptocurrency to see a much stronger correction than the one seen yesterday
  • One trader is watching for a rejection at $11,700, as he notes that this could lead to a “slow bleed” to $10,000
  • An ardent defense of this level, however, may allow the mid-term uptrend to resume

Bitcoin is currently consolidating around its local highs following the swift overnight rebound it faced.

This rebound came about following a day of turbulence, which sent BTC surging as high as $11,600 before it saw a swift rejection that led it to plunge to lows of $11,150.

This struck a blow to the cryptocurrency’s technical strength. Still, buyers were able to post an ardent defense of the lower-$11,000 region that ultimately allowed it to climb significantly higher.

That being said, another rejection at $11,700 could spark a deeper correction that sends BTC as low as $10,000 before it can continue ascending.

Bitcoin Rebounds from Daily Lows as Buyers Regain Control of Short-Term Trend 

At the time of writing, Bitcoin is trading up just over 1% at its current price of $11,450. This is around the price at which it has been trading at throughout the past few hours.

Yesterday morning, news of the Fed’s decision to allow inflation to run hot for the coming months and years sent the prices of hard assets – like Bitcoin – flying higher.

BTC swiftly reached highs of $11,600 before it lost its momentum and plunged to lows of $11,150.

The visit to this level sparked a slow grind higher that eventually allowed the cryptocurrency to climb back to $11,500. From this point on, it has been trading sideways, struggling to maintain its momentum.

Here’s the Level That May Spark a Deep BTC Correction

In the near-term, analysts are watching for a Bitcoin movement to $11,700. One trader is specifically noting that a rejection at this resistance level could spark a correction that is deeper than that seen yesterday.

“No interest to short this market, but this is how I would envision a small potential correction. 1) Rejection from 11,700 2) Slow bleed and retest of 10,000 resistance as support 3) Successful retest and uptrend resumed…” he said while pointing to the below chart.

Image Courtesy of Teddy. Chart via TradingView.

Unless Bitcoin’s momentum stalls and it consolidates here, there’s a strong likelihood that yesterday’s volatility is just the start of a new round of turbulence.

Featured image from Unsplash.
Charts and pricing data from TradingView.





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Bitcoin

3 reasons why Bitcoin price has not been able to rally back above $40K

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The ongoing story for the past couple of months in the cryptocurrency market has been confusion on whether Bitcoin (BTC) is destined for another leg down or is finally ready to break out toward new highs.

Bitcoin’s price history and data from previous corrections suggest that the current struggles for the top cryptocurrency could persist for a little bit longer due to the strengthening dollar, the possibility of decreasing economic stimulus and a slew of technical factors connected to Bitcoin’s price action.

A strong dollar threatens Bitcoin’s recovery

According to data from Delphi Digital, one of the biggest factors placing strain on risk assets around the globe is the strengthening U.S. dollar which appears to be attempting a trend reversal after falling below 90 in late May.

DXY 1-day chart. Source: TradingView

Rising dollar strength put a halt to the year-long uptrend in the 10-year US Treasury yield which is also a reflection that the economic expansions seen in the first half of 2021 are beginning to lose steam and there is a threat that a new wave of Covid-19 infections threatening the global economic recovery.

Fractals and the Death Cross suggest the correction is not over yet

The short-term outlook for Bitcoin remains bearish as previous instances of the “Death Cross,” which appeared on BTC’s chart in late June, have been followed by a corrective period that can last for nearly a year.

Bearish crossover of the 50 day and 200-day MA. Source: Delphi Digital

According to the analysts at Delphi Digital, the 12-month moving average is being tested as support, and a dip below this level would signal further downside for BTC price.

Bitcoin price testing the12-month moving average. Source: Delphi Digital

The 12-month moving average has been a key support level for Bitcoin historically, so how the price performs near this level could dictate whether the current uptrend remains intact.

Related: El Salvadorians take to the streets to protest Bitcoin law

Overall, caution is warranted for traders because low volumes have historically led to higher volatility when fewer open bids can lead to rapid price fluctuations.

As explained by Kevin Kelly, a certified financial analyst at Delphi Digital, “the short-term outlook turns quite a bit more bearish if and when we break those key levels” near $30,000.

Kelly said:

“I don’t necessarily think that we will see as nearly as significant of a drawdown as we did in say, post-December 2017, early 2018, and into the end of that year. But I do think, just given the structure of the market, that we could potentially be in for a bit more short-term volatility and potentially some more headwinds here, in the near term.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.