After the price peaked at $ 52,000 on Monday, Bitcoin lost more than $ 4,000 in just one day. So is BTC entering a deeper correction or will it hit a higher low and rise again?
Short term outlook
Last week, BTC broke out over a short-term downtrend line in the 4-hour timeframe. After completing a pullback, the price rebounded to hit the resistance at USD 52,000 (Monday).
However, the market did not have enough momentum to continue the rally (low volume) and the bears regained the upper hand. Currently, BTC is trading above a small area of support – as can be seen in the chart below.
If BTC loses this area of support, the $ 45,000- $ 46,000 area will be the next critical support. If we look at the RSI, we can also see that the lower Bollinger Band is approaching the oversold zone; Hence, we might see a positive correction at some point.
BTC / USDT 4-hour chart | Source: TradingView
Bitcoin failed to break through the Ichimoku cloud in the daily timeframe. Now the benchmark cryptocurrency has fallen below Tenkan-Sen.
Based on the historical reactions price has shown earlier, Bitcoin will need to break above the Ichimoku cloud to regain its upward momentum. As shown in the graph below, the green zones can act as strong support in the daily timeframe.
BTC / USDT daily chart | Source: TradingView
Currently, 26% of the supply is at a loss. Historically, the market lost 32% of supply at the low of $ 29,000 in July.
As a result, there is a high likelihood that the $ 40,000 to $ 42,000 zone will be retested and potentially hit a local bottom. In fact, the low hit in March 2020 suffered a loss of nearly 60% of supply.
You can see the BTC price here.
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Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.