The price of Bitcoin continued to fall, and the knock-on effect was a sharper correction in altcoins and DeFi tokens. At the time of writing, the price of Bitcoin has fallen to its lowest level in 6 months, and most analysts are not optimistic about an immediate reversal of the situation.
Data from Cointelegraph Markets Pro and TradingView show that a wave of selling that began late on Jan. 20 continued until midday on Friday, when BTC hit a low of $36,600.
BTC/USDT daily chart Source: TradingView
Here's what analysts are saying about the current economic downturn, and what might play out in the coming weeks.
The sudden drop in Bitcoin's price has many crypto traders predicting various dire outcomes, such as a long-term bear market. Others, such as independent market analyst Rekt Capital, were less hasty in announcing that it was all over.
As shown in the chart below, published by Rekt Capital, “The recent BTC drop means that BTC is now in the lower region of its current $38,000-$43,100 range.”
BTC/USD 1-week chart Source: Twitter
According to Rekt Capital, “Bitcoin is just consolidating in the $38,000-$43,100 range,” but needs to hold this support level to avoid falling into a lower consolidation range.
Rekt Capital says,
"Technically, the $38,000 support area is the watershed for BTC to enter the $28,000-$38,000 consolidation range. The last time Bitcoin consolidated in the above range was in the first and second quarters of 2021."
David Lifchitz, managing partner and chief investment officer of ExoAlpha, analyzed the price trend of BTC from a purely technical perspective. He pointed out that "BTC's huge head and shoulders pattern is now complete. With BTC at $38,300, the neckline is broken."
BTC/USDT daily chart Source: TradingView
From a theoretical standpoint, Lifchitz noted that the pattern predicts a drop to $20,000 is possible, but said that "the decline is usually smaller than that" and hinted that "the $31,000 area is definitely on the horizon."
From a fundamental point of view, Lifchitz pointed out that there are multiple factors that are adversely affecting BTC, including the Federal Reserve's tightening monetary policy, EU regulators seeking to ban proof-of-work mining, profit-taking in late 2021 and concerns about the new crown epidemic. Continued uncertainty about the economic outlook of the pandemic.
Lifchitz says,
“As a result, Bitcoin could fall to the low-to-mid $30,000s soon, before real bargain hunters emerge.”
Analyst and Cointelegraph contributor Michaël van de Poppe offered a pullback versus June 2021. Traders reacted to the drop, posting the following charts highlighting major support areas for each period of weakness.
BTC/USD daily chart Source: Twitter
van de Poppe said,
“Back in June → people were waiting to buy at $23,000 to $25,000. Now → people were waiting to buy at $30,000. Similar false breakouts to the upside to subsequently form support levels.”
A similar point was made by trader and anonymous Twitter user “Fomocap,” who posted the following chart outlining BTC’s performance over the next few days.
BTC/USD daily chart Source: Twitter
Fomocap says,
"Bounce to $44,000-42,000 retest, $35,000-33,000 if rejected. What do you think?"
A final bit of insight was provided by cryptocurrency trader Scott Melker, who posted the chart below showing details of price below key levels that must recover.
BTC/USD daily chart Source: Twitter
Melker said,
“Bulls are looking for a Hail Mary close above $39,600. A close below that level (especially a weekly close) suggests a breakdown in market structure, lower lows, etc. Bears show no mercy.”
Currently, the total market capitalization of cryptocurrencies is $1.801 trillion, with Bitcoin dominance at 40.4%.
Cointelegraph Chinese is a blockchain news information platform, and the information provided only represents the author's personal opinion, has nothing to do with the position of the Cointelegraph Chinese platform, and does not constitute any investment and financial advice. Readers are requested to establish correct currency concepts and investment concepts, and earnestly raise risk awareness.
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