Bitcoin has pulled back nearly 50% from its all-time high near $20,000 and now stands at $10,500. This is an important area for Bitcoin, will it find support here or continue lower?
Bitcoin has retraced 40% or more many times historically during its epic climb higher. This is the nature of such a volatile market. ‘HODLing’ has paid off big time for investors up to now, but this may not always be the case.
It’s important to remember that downtrends offer excellent opportunities for traders as well as uptrends. So, whether Bitcoin continues lower or higher, the chances are, there will be some good trends that investors can take advantage of.
As always, let’s take a look at the charts objectively and see what potential scenarios could play out.
BTC/USD – Weekly Chart
We can see on the weekly chart, that Bitcoin is currently right at the 20-week simple moving average (SMA). Price has found support near the 20-week SMA historically, so it is an important area to watch.
If price breaks down below it then this is a bearish scenario, and the next stop could be the 40-week SMA between $7000 and $8000. This would also indicate a change in price behavior and the possible end of the parabolic curve pattern.
The bullish scenario is if the price can hold above its 20-week SMA and start moving higher back up towards its 10-week SMA. That would indicate that this move lower may just be another sharp pullback, just like we’ve seen historically.
BTC/USD – Daily Chart
The daily chart paints a slightly more bearish picture as we can see the formation of a lower high and lower low. Downtrends consist of lower highs and lower lows so the bulls will not want to see this continue.
Today’s candle also looks like it’s just starting to break lower below the 100-day SMA. The next stop lower would likely be near the 200-day SMA near $8000. The 50-day SMA is also curling over and starting to move in a downtrend.
The bullish scenario is if the price can get back above the 100-day SMA, hold and then start moving back up towards the 50-day SMA.
When markets move higher, they need to consolidate and rest along the way. The more powerful the move higher, the longer they tend to consolidate. Ethereum consolidated for 5-months during 2017 before moving higher. We could see a similar situation occur with Bitcoin.
BTC/USD – 4-Hour Chart
The 4-hour chart shows the formation of a lower high and lower low clearly. If price breaks lower here, then we may see a new lower low with possible support near $7000 or $8000.
The downward sloping trendline will be an area of resistance if we move higher from here. If the price can break above that trendline, then that would be a bullish scenario and look like a massive bull-flag breakout.
Key areas to watch:
- 20-week & 100-day SMA’s – Will price hold here or break lower?
- 40–week & 200-day SMA’s – Potential area of support if BTC moves lower.
- $7000 & $8000 – Near-term support area if we move lower.
- Highs and Lows – Will we see a continuation of lower highs and lower lows?
- 10-week & 50-day SMA’s – Bullish if the price can move higher towards these.
Will Bitcoin continue lower or is this just another pullback? Is it best to HODL or is it different this time? We would love to hear your thoughts in the comments section below!
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