Bitcoin’s downtrend has come to a halt after a sharp drop from $32K following a breakout of a bearish flag. The $17K – $20K range of 2017 all-time highs is acting as a strong support, pushing the price towards the important resistance levels of $24K and perhaps $30K.
However, the cryptocurrency will need to break above the 50-day EMA before it can retest the $30K level.
A price reversal is indicated after printing multiple bullish candles on the daily time frame. If the mentioned levels are retested and BTC is rejected on the downside, it could send the cryptocurrency into another downside spiral.
On the other hand, if the bearish momentum starts at the current rates, another impulsive move to the downside could be triggered, pushing the market beyond the current support area and towards the $15K mark. However, the most recent price action makes this particular scenario less likely.
4 hour chart
On the 4-hours time frame, it is clear that the price is forming a descending channel at the $17K – $20K support area, pointing to a possible rally as the pattern can be seen as a bullish reversal signal.
The RSI oscillator is indicating a bullish divergence between the last few lows of the channel, further strengthening the prospects. If the price rebounds from this level and confirms the breakout, another race towards the $24K resistance level can be expected.
On the other hand, if the price fails to complete the pullback and turns back inside the channel, the pattern will be considered as failed. This could lead to an increase in selling pressure and a break below the $17K-$20K support area, followed by a sharp decline to the $15K area.
bitcoin funding rates
The market has been going through a prolonged and sharp downtrend over the past few months, and this price crash has taken its toll on the sentiment. This is decidedly bearish and coupled with negative funding rates in the perpetual futures market, indicating that traders are aggressively shorting BTC as they expect continued lower prices.
However, these periods of negative funding rates pose a good potential for a short squeeze, which is triggered by a rapid reversal in price and a short liquidation cascade. These short squeezes usually occur at the price bottoms and initiate a bullish phase as the price rallies and creates higher bullish momentum.
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Cryptocurrency charts by TradingView.