Bitcoin is trading below the 200-EMA, a bearish sign. Will BTC recover? Read key reasons for this bearishness and Bitcoin price analysis. Is Bitcoin (BTC) gearing up for a powerful pullback after a notable price drop? $31K is a strong resistance for Bitcoin but has been forming the HH-HL pattern, so it is interesting to assume the next BTC move. We have discussed the key reasons for this downtrend, from higher volatility to potential regulatory changes. Are you interested in investing in Bitcoin? Please read this post with a technical analysis. So without wasting time, let’s begin.
Key Reasons Behind the Recent Drop in Bitcoin Price
Bitcoin, the leading digital currency in the world, has been experiencing a decrease in its price. Although Bitcoin has always been known for its volatility, this recent drop has made people curious about why it’s happening.
Important Reasons for This Selling Pressure
1. Implications of Stricter Regulation
A significant factor in the recent decline of Bitcoin’s price can be attributed to comments made by Coinbase CEO Brian Armstrong. Through a series of messages on Twitter, Armstrong hinted at the possibility of increased regulatory scrutiny by the U.S. Treasury Department in the cryptocurrency space. The lingering uncertainty regarding regulatory measures has long been a concern for the sector, and Armstrong’s remarks have emphasized this aspect.
2. Overbought Conditions and an Impending Correction
Bitcoin’s rapid surge in value made it overbought, signifying that its price had escalated too swiftly and was due for a correction. The pullback in Bitcoin’s price was anticipated, given its steep climb to nearly reach its all-time high in December 2017.
Such significant price movements often trigger corrections, as investors who entered at lower price levels seek to secure their profits. Moreover, individuals holding Bitcoin since the market downturn in 2018 might opt to exit their positions during such price fluctuations.
3. Bitcoin’s Innate Volatility
The recent price drop of Bitcoin underscores its intrinsic volatility. Over the years, Bitcoin has experienced numerous similar declines, so it is not new! It only presents the BTC price fluctuations, but investors are still optimistic based on different algorithmic Bitcoin price predictions. However, it is also risky to trade in Bitcoin while it is showing tremendous volatility.
4. Libra’s Emergence and Mainstream Interest
As early as January, the announcement of the potential launch of Libra, Facebook’s digital currency network, ignited curiosity within the cryptocurrency market. Although some critics think that Libra does not represent the traditional cryptocurrency market, the prospect of its launch marks a significant milestone in the broader realm of digital currencies.
Furthermore, the adoption of cryptocurrencies by mainstream entities is gaining momentum. Notably, PayPal’s decision to allow customers to purchase and utilize cryptocurrencies for transactions adds legitimacy to these digital assets.
5. Growing Institutional Involvement
Distinguished investors like hedge-fund manager Paul Tudor Jones have vocally advocated for Bitcoin as a valid investment. Jones characterized Bitcoin’s recent surge as being in its “first innings,” implying substantial room for growth. The increasing interest from institutional investors underscores Bitcoin’s consideration as a credible alternative to conventional fiat currencies and as a hedge against traditional investment instruments.
Analyzing Bitcoin’s Price Action: Is BTC Ready for a Breakout?
Bitcoin’s recent price movements have left traders and investors speculating about its next direction. Let’s break down the charts and key indicators to understand whether BTC is gearing up for a breakout:
Bitcoin Price Predictions: Daily Chart Insights
In the daily chart, BTC/USD is trading around $26K. We can observe that Bitcoin has been hovering around the 0.236 Fibonacci level. The initial expectation was for a rebound around the $29,000 mark.
However, the U.S. Dollar Index (DXY) reversal indicated that the markets needed to take a breather. Despite this, BTC maintains its position just above the $26K support. Based on our research, the BTC price will trade between $26K and $60K in 2023, so you can expect a price surge.
However, BTC has broken the critical support level of $27,200, which is the 200-EMA line, often referred to as the “golden pocket.” A signal for concern has arisen if the BTC price continues to trade below this level. However, a temporary recovery is expected, but you should not be too bullish in the short term.
BTC Price Predictions: Weekly Timeframe Analysis
On the weekly time frame chart, a bearish divergence has become apparent. Bitcoin is holding above strong support of $25,500. If it sustains over this price, we can expect a continuation of this higher low formation. Otherwise, we have to consider BTC as long-term bearish. However, a weekly close below this range could trigger bearish momentum, potentially pushing the Bitcoin price down to $20K.
Key Support: $25,500, $20,000
Key Resistance: $31,000
Conclusion: Should You Start Investing in Bitcoin?
Analyzing Bitcoin’s price action, it becomes evident that key support and resistance levels are vital in determining its immediate trajectory. The daily chart illustrates a short recovery, but the weekly chart is still bearish.
As the cryptocurrency market evolves, the news, sentiments, and technicals will play important roles in determining Bitcoin’s next move. Traders and investors must closely monitor these levels and prepare for potential shifts in market sentiment.
Also read: Top 10 Crypto Exchanges for Trading Bitcoin and Altcoins
