Bitcoin (BTC) crashed on Feb. 17 and soon traded below $40,000. However, it has since recovered and is trying to stay on top of its bullish structure.
Bitcoin fell sharply on Feb. 17, creating a bearish engulfing candle in the process. The move down came after being rejected by the $44,300-$45,000 horizontal resistance area.
In addition to the significant decline, technical indicators are giving bearish signals. This is visible on the RSI (red symbol) which has fallen below 50. The RSI is a momentum indicator and moves below 50 are considered bearish.
BTC/USDT daily chart | Source: TradingView
The six-hour chart shows Bitcoin attempting to hold above an ascending support line that has been in place since Jan. 24. A break below this line would call into question the entire bullish structure.
BTC/USDT 6 hour chart | Source: TradingView
Meanwhile, the two-hour chart is showing no bullish divergence, a sign that upward movement is yet to come. However, it is worth noting that the RSI has fallen into oversold territory (green circle). The last time this happened, BTC hit a key local bottom.
BTC/USDT 2 hour chart | Source: TradingView
Due to yesterday’s dip, the possibility of the January 24 rally beginning as a 5-wave impulse is now in doubt.
The reason is that the price is about to break below the support line connecting the two bottoms of wave 1-2. In this case, this model becomes invalid.
If the ongoing decline is wave four (red), sub-waves A and C are already exactly 1:1 (black).
Therefore, if the decline continues, it suggests that the Jan. 24 rally is a correction.
BTC/USDT 2 hour chart | Source: TradingView
And the number of long-term waves would favor the scenario that the entire movement is a symmetrical triangle containing wave 4.
In this case, Bitcoin could drop to $37,000 before rallying to $50,000.
BTC/USDT daily chart | Source: TradingView
While the possibility of a terminating crossover is still valid, the number of partial waves is extremely irregular, raising doubts about its validity.
BTC/USDT daily chart | Source: TradingView
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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