Bitcoin (BTC) ended well below analysts’ predicted target of $ 100,000 in 2021. Kraken CEO Jesse Powell, who has also forecast a price target of $ 100,000 for Bitcoin, remains optimistic over the long term, but does not rule out a sharp decline in the short term.
One of the negative factors that could put more pressure on Bitcoin in the short term is the change in monetary policy by the US Federal Reserve. On December 15, the Fed announced that it would cut its bond-buying program faster and also expected three rate hikes by 2022.
Sam Stovall, Chief Investment Strategist at CFRA Research, to speak CNBC said that historically the S&P 500 has tended to post negative returns over a 12 month period if the Fed hikes three or more interest rates.
If history rhymes, Bitcoin could also have difficulty moving in 2021 due to its close correlation with the S&P 500 at different stages. When a risk-free sentiment sets in, investors can sell their assets.
Given this uncertainty, turn to the charts and do long-term bitcoin analysis to identify the top values to look out for.
BTC technical analysis
Bitcoin’s strong rally in 2017 saw the Relative Strength Index (RSI) rise above 96, suggesting euphoria among traders. Vertical rallies are seldom sustained and are usually followed by a sharp correction or period of consolidation. This is what happened after the end of the Bull Run in 2017.
Bitcoin / USD Monthly Chart | Source: TradingView
The Bitcoin / USD pair stayed below the December 2017 high until it broke out in December 2020. This shows that it took the market 3 years to base the price on.
The pair’s strong rally in 2021 pushed the RSI above 91 in March before profit-taking occurred. Unlike 2017, however, the bulls have aggressively defended the 20-month EMA ($ 37.281).
This shows that sentiment is still positive and traders are taking advantage of the decline to accumulate. The rally then pushed the pair to a new all-time high of $ 69,000, but the bulls were unable to hold the higher. This shows that traders take profits on rallies.
The sharp correction has pulled price back towards the 20-month EMA and the RSI is showing bearish divergence, suggesting that bullish momentum may be wearing off.
If the bears turn down and hold the price below the 20-month EMA, the pair may fall to the critical support at $ 28,800. This is an important level for the bulls to defend as a break below it can result in longer base build-up.
On the flip side, if the price rises from current levels, the pair can retest $ 69,000. A break and close above this resistance could signal the continuation of the uptrend.
Bitcoin / USD weekly chart | Source: TradingView
The bulls pushed the price above the $ 64,899 level twice but were unable to hold the higher levels. This may have trapped some aggressive bulls, leading to the liquidation of long positions.
The 20-week EMA ($ 52.016) has started falling and the RSI has plunged into negative territory, showing that the bears are trying to return. The bulls tried to defend the 50-week SMA ($ 47.70) but failed to push the price above the 20-week EMA.
This may have put more selling pressure and the bears are now trying to push the price to the next strong support at $ 39,600. This is an important level that the bulls must defend as if it were broken. The pair can drop to $ 28,732.
Such a move could delay the start of the next phase of the uptrend, placing the pair in a range between $ 28,732 down and $ 69,000 up.
Conversely, if the price rises from current levels and breaks above the 20-week EMA, the bulls will take another step to break the resistance area of $ 64.899 to $ 69,000.
If successful, the upside momentum will pick up and the pair could begin their journey north with targets around $ 100,000-109,000 where the rally could face major headwinds.
Alternatively, a break and close below $ 28,732 could result in a bear market with the next strong support at $ 20,000.
BTC / USD daily chart | Source: TradingView
The pair have fallen into a descending parallel channel over the past few weeks. Both moving averages are sloping down and the RSI is in negative territory, showing that the bears are in control.
If the price falls from current levels or the 20-day EMA ($ 50.054) it shows that sentiment remains bearish and traders are selling on rallies. This may pull the price to the December 4th low of $ 42,333.
This is an important level for the bulls to defend because if it is breached the bears will attempt to push the price below the channel’s support line. If they succeed, the pressure to sell could get even stronger.
The $ 39,600 to $ 37,300 zone can serve as strong support, but unless the bulls push the price above the 20-day EMA, the decline can extend to $ 28,800.
Conversely, if the price rises and breaks above the resistance line of the channel, it signals that selling pressures may ease. After that, the pair may move to the 50-day SMA ($ 56,524) where it could pose another tough challenge.
The bulls need to push and hold the price above the 50-day SMA to signal the start of an upward move to $ 60,000. This level could act as strong resistance, but if exceeded the rally could extend to all-time highs.
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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.