After the green days, BTC faced resistance at $45,000. Along with the negative sign from the global markets, Bitcoin was rejected and fell below $42,000.

Looking at the stablecoin supply ratio, a significant amount is on the sidelines, suggesting potential buying power. Meanwhile, the price action experienced a retracement phase back to dynamic resistance, which was recently breached. Overall, this short-term correction is a good move for a reliable price recovery.

Technical Analysis

Long term: daily chart

Bitcoin started a small rally from $37.2K with a solid set of green daily candles.

However, the upward momentum has weakened. On Thursday, the price was rejected by the descending resistance line (purple) along with the $45,000 resistance area.

Currently, BTC is correcting and retesting the 50-day MA (~$42.2K) that it recently broke above, which resembles a pullback pattern. Despite the recent correction, BTC has finally made a higher high, increasing the likelihood of a trend reversal.

Currently, BTC needs to make a higher low during this correction to complete a healthy reversal structure.

BTC/USDT daily chart | Source: TradingView

Short term: 4 hour chart

BTC formed two highs after hitting the previous major pivot point at the $45,000 resistance area. This is a bearish pattern and often leads to a subsequent drop. There are currently two possible scenarios:

1. As mentioned above, the price will be rejected at the resistance area, correcting lower and dropping to a lower price to form a higher low.
2. The price will soon find support and break above the descending trend line, rally to higher levels and target the next key resistance around the $52,000 region.

Given the double top and descending momentum, the first scenario seems more likely.

BTC/USDT 4 hour chart | Source: TradingView

Onchain analysis

The chart below includes the bitcoin price (white), 7-day MA (yellow), and 28-day MA (blue) of the stablecoin supply ratio (SSR).

The SSR Index is calculated by dividing the market cap of BTC by the market cap of all stablecoins. The SSR indicates when there is enough liquidity to buy or when there is insufficient purchasing power to increase the price relative to BTC’s market cap.

Using the MA crossover, potential bullish and bearish waves have been signaled with fairly high accuracy over the past year. Now, after several months of correction (since November’s ATH), the SSR’s MAs have finally formed a bullish signal, possibly signaling the end of this bearish cycle.

Of course, this indicator should not be taken into account for decision-making, but it has been accurate for the past few months.

Source: CryptoQuant

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.

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