Bitcoin’s (BTC) correction has finally come, after more than two weeks of exceptional gains. This medium timeframe uptrend has traversed the entirety of the longer-term structure, which is a downtrending channel in play since July. Now at the top of this channel, Bitcoin is at what may prove to be the most important decision point of its entire 2020 market.
We start on a local 4-hour chart, to see what has happened and how the indicators look. We see that a bearish divergence on the RSI telegraphed a capitulation through local support around $8,900, and was caught exactly above the next major support level down at $8,460. Another leg down does not look unlikely, as the formation strongly resembles a bear flag; and a corrective movement usually takes three waves to complete, only two of which look to be complete here.
The good news here is that, the zone of support from here down to about $8,150 has a good chance of stopping any price fall. The larger trend is up, and a period of correction within this one would not disturb that uptrend; and would be a healthy place to consolidate.
On the 12-hour chart, we see the scope of a full retracement according to the start of the present uptrend. This could go down quite a long way and still technically preserve the possibility of a medium term uptrend. There is quite a ways down in the Fibonacci retracement scale before price will engage the “golden pocket” between .618-65.
The histogram is still trending down but looks to be starting a deceleration from a bearish contraction. We can also note that, at least here on the popular Coinbase exchange, there has not been much sell volume following the initial sharp selloff yesterday.
Obviously, it is foolish to guess what will ultimately happen. But whether or not support holds here, what we can say is that, at present, the uptrend started on January 2 has not been mortally wounded. But that may come to pass; and if it does, we are looking at another leg down in the huge downtrend that has been in play for more than six months.
Bitcoin needs to get over $9,100, and then $10k, and stay above both of these levels with conviction, in order to avoid another breakdown like the one we saw in late October. One interesting thing to note here is that Bitcoin’s market dominance has been falling even as price has risen these past weeks. It is currently resting on a support zone, and looks ready to fall through it, if this level continues to be tested.
We are in the thick of a decision period for Bitcoin. Just as it looked ready to shatter the critical $9,100 level, the leading crypto rapidly sold off and foreclosed on this possibility for a clear break. Now we see if someone has a Plan B.
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