Bitcoin price analysis, the drop isn’t likely to happen again

Spread the love

The price of Bitcoin dropped $3,596 on BitMEX in March. Over $1 billion in futures contracts were liquidated at the time, made a chaos in the market. Bitcoin has significantly declined from around $12,050 to as low as $9,875 in five days. The sharp drop caused the sentiment around the cryptocurrency market to turn cautious. But the price analysis shows that the bitcoin drop isn’t likely to happen again.
The market is in a completely different position than where it was in March. Bitcoin’s market structure remains in a bullish state, especially considering that BTC traded above $10k for the longest time period since 2017.
There are some factors that buoy the longer-term bull trend of Bitcoin, which makes it different from March. There are the presence of whale orders, BTC’s resilience above $10,000, and an expected reaction to heavy resistance, March’s black swan event, and the market dynamic at the time of the crash.

whale orders

According to market data, whales are bidding Bitcoin at around $8,800. That level is important as it marked the start of a new bull run in June.
After five weeks of consolidation above $8,800, Bitcoin went on to surge to $12,468 at its yearly peak on Binance. Whales are eyeing the $8,800 macro support as a likely short-term target for BTC.
Whales tend to mark tops and bottoms as they seek significant liquidity. As an example, data from Whalemap showed that a whale who purchased nearly 9,000 BTC in 2018 took profit at $12,000.
The whale held onto the BTC and took profit after two years, marking a local top. Whether how much of the 9,000 BTC the whale sold remains unclear. The point is that whales have often marked local tops and bottoms for Bitcoin.
Cole Garner, an on-chain analyst, shared a chart that showed Bitfinex traders are bidding $8,800.
“Smart money has their bids sitting at $8,800. I expect the bottom will likely be around there,” the analyst said.
Before $8,800, there is a CME gap at $9,650, which has been there since the end of July. There are key levels before $8,800, and even if Bitcoin was to drop to $8,800, it would mark a 29% drop from the highs. Bitcoin historically declined by 20% to 40% during bull markets, resetting expectations before the next leg higher.

BTC has been above $10k for the longest time period since 2017

Bitcoin has been above $10k for the longest period since 2017. That says that the $10k level served as a strong support level for a long period.
The bitcoin price analysis also shows that many buyers protected the $10k area, which in previous years acted as a heavy resistance area.
Bitcoin dropped below $10,000, and even if BTC sees a bigger pullback, $10,000 would not likely remain a massive resistance level in the future.

$12,000 was multi-year resistance, so big reaction was expected

The monthly candle of Bitcoin closed above $11,000 for the first time since 2017. There have been many first instances in terms of technical analysis throughout the past months.
Less than some months ago, the high-$9,000 region acted as a big resistance area that caused BTC to drop sharply at repeated retests. Now, it has turned into a strong support region, which could serve as a strong foundation for the medium term.

The black swan event

That drop can be considered as a black swan event that many investors did not expect.
Due to the pandemic, Bitcoin fell in tandem with stocks, gold, silver, and other legacy markets. Finally, gold, stocks, and Bitcoin all recovered amid monetary stimulus.
Expecting a similar response in Bitcoin as a black swan event triggered by a once-in-a-generation crisis is premature.

It was not supposed to drop as low, data shows

The only factor Bitcoin dropped to $3,600 in March was because of an unprecedented cascade of liquidations. Over $1 billion in futures contracts, mostly on BitMEX, were liquidated. It caused BTC to drop by more than 50%, but not many users were selling by choice.
“Cascading liquidations were most prominent on BitMEX, which offers highly leveraged products. Amidst the selloff, a Bitcoin on BitMEX was trading well below that of other exchanges. It wasn’t until BitMEX went down for maintenance at peak volatility (citing a DDoS attack) that the cascading liquidations were paused, and the price promptly rebounded. When the dust settled, Bitcoin had briefly spiked below $4000 and was trading around the mid $5000s,” Coinbase explained.

Leave a Reply

Your email address will not be published.