Bitcoin dodges major resistance test – recovery above $37,000 could be a dead cat bounce
Bitcoin broke through $37,000 on Jan. 28 as traders watched, waiting for a retest of the resistance level.
BTC/USD chart 4 hours | Source: TradingView
Bitcoin evade avoid testing great resistance
Data from TradingView shows BTC recovering from a drop to $36,175 earlier in the day.
While still in range trading, many expect the momentum to continue testing the resistances near $40,000 whether the end result is a fresh correction or not.
“Most likely bearish scenario and that’s exactly why I think we’re going to see a surprise move. Only after convincingly reclaiming $40,000 will I side with the bulls,” crypto trader Crypto Ed noted on the near-term outlook.
Analyst and trader Anbessa suggested holding $38,500 to allow the correction to complete.
Finally, low funding rates coupled with improving derivatives market conditions could trigger a timely uptrend.
#BTC has re-entered the $28,000-$38,000 consolidation range
BTC was last in this range in Q1 and Q2 of 2021
Of course, in this recent bounce, the range high (red) will be the main resistance to beat to confirm further upside$BTC #crypto #Bitcoin pic.twitter.com/aojF2Zcm0y
— Rekt Capital (@rektcapital) January 25, 2022
“BTC re-enter merge area $28k-$38k. BTC was last consolidated in this range in Q1 and Q2 of 2021. Of course, in this recent bounce, the high (red) will be the key resistance to beat for further bullish confirmation.”
On Feb. 24, Rekt Capital marked an area where Bitcoin would reignite an uptrend on a longer weekly timeframe. As reported, the level sits at $39,600 and the weekly price must close there or higher.
”Feel similar” in early 2018
However, Crypto Ed is not the only one predicting a new possible collapse.
Despite the liquidity during a brief dip below $33,000 earlier in the week, bitcoin has yet to convince everyone that the price has hit a real bottom.
In discussing the matter, Twitter analyst TXMC Trades concluded that BTC “has yet to fall” from current spot prices, and it appears history supports that theory.
“It doesn’t seem right to assume that BTC has tumbled straight down from ATH without a rally just to have a reversal as a premise without properly testing the bottom of the range. Similar sentiments were felt in April 2018 when a $6,000 raise was the premise but ultimately collapsed. Just a strong feeling.”
However, TXMC notes that the $33,000 price surge has liquidated more short positions than at any time since Bitcoin’s $69,000 ATH last November, citing data from analytics firm on-Glassnode Chain.
Bitcoin futures short liquidation | Source: TXMC Trades
On the other hand, the most notable on-chain metric that can illustrate the current state of the market is MVRV – the ratio of market cap to real capitalization, which indicates whether a price is overvalued.
Previously, values above 3.7 signaled a price high and values below 1 a price low. Currently the MVRV is 1.5 and there is no prospect of market momentum. Therefore, the probability of achieving an MVRV of 1 or less in the medium term is quite high. Unless there is a macroeconomic catalyst stimulating the demand side and prices start to rise temporarily, even with a near-term recovery similar to that seen in early 2018.
Source: CryptoQuant
Dead Cat Bounce for Bitcoin?
Daily time frame
The daily chart shows a broader year-over-year consolidation. BTC is currently trading towards the lower end of this range and there is a high possibility that the price will bounce off and start a short-term rally, also known as the “dead cat bounce” scenario.
Furthermore, the daily RSI is showing an oversold sentiment in the market and it is currently trying to break the 30% level. Technically, just like February 2021, an accumulation phase is underway leading to a short-term uptrend. However, the risk of macro factors should be taken into account and if the price falls below the lower band things could turn out very badly.
Source: TradingView
4 hour time frame
In the 4 hour timeframe, the price of MA 50 and MA 100 was rejected many times. Rejection of the key downtrend line confirms this bearish momentum. To predict a bullish reversal, BTC needs to break these dynamic resistances. The most likely scenario right now is a consolidation phase in the $30,000 to $40,000 range.
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.
Join CoinCu Telegram to keep track of news: https://t.me/coincunews
Author
Analysis
Bitcoin dodges major resistance test – recovery above $37,000 could be a dead cat bounce
Bitcoin broke through $37,000 on Jan. 28 as traders watched, waiting for a retest of the resistance level.
BTC/USD chart 4 hours | Source: TradingView
Bitcoin evade avoid testing great resistance
Data from TradingView shows BTC recovering from a drop to $36,175 earlier in the day.
While still in range trading, many expect the momentum to continue testing the resistances near $40,000 whether the end result is a fresh correction or not.
“Most likely bearish scenario and that’s exactly why I think we’re going to see a surprise move. Only after convincingly reclaiming $40,000 will I side with the bulls,” crypto trader Crypto Ed noted on the near-term outlook.
Analyst and trader Anbessa suggested holding $38,500 to allow the correction to complete.
Finally, low funding rates coupled with improving derivatives market conditions could trigger a timely uptrend.
#BTC has re-entered the $28,000-$38,000 consolidation range
BTC was last in this range in Q1 and Q2 of 2021
Of course, in this recent bounce, the range high (red) will be the main resistance to beat to confirm further upside$BTC #crypto #Bitcoin pic.twitter.com/aojF2Zcm0y
— Rekt Capital (@rektcapital) January 25, 2022
“BTC re-enter merge area $28k-$38k. BTC was last consolidated in this range in Q1 and Q2 of 2021. Of course, in this recent bounce, the high (red) will be the key resistance to beat for further bullish confirmation.”
On Feb. 24, Rekt Capital marked an area where Bitcoin would reignite an uptrend on a longer weekly timeframe. As reported, the level sits at $39,600 and the weekly price must close there or higher.
”Feel similar” in early 2018
However, Crypto Ed is not the only one predicting a new possible collapse.
Despite the liquidity during a brief dip below $33,000 earlier in the week, bitcoin has yet to convince everyone that the price has hit a real bottom.
In discussing the matter, Twitter analyst TXMC Trades concluded that BTC “has yet to fall” from current spot prices, and it appears history supports that theory.
“It doesn’t seem right to assume that BTC has tumbled straight down from ATH without a rally just to have a reversal as a premise without properly testing the bottom of the range. Similar sentiments were felt in April 2018 when a $6,000 raise was the premise but ultimately collapsed. Just a strong feeling.”
However, TXMC notes that the $33,000 price surge has liquidated more short positions than at any time since Bitcoin’s $69,000 ATH last November, citing data from analytics firm on-Glassnode Chain.
Bitcoin futures short liquidation | Source: TXMC Trades
On the other hand, the most notable on-chain metric that can illustrate the current state of the market is MVRV – the ratio of market cap to real capitalization, which indicates whether a price is overvalued.
Previously, values above 3.7 signaled a price high and values below 1 a price low. Currently the MVRV is 1.5 and there is no prospect of market momentum. Therefore, the probability of achieving an MVRV of 1 or less in the medium term is quite high. Unless there is a macroeconomic catalyst stimulating the demand side and prices start to rise temporarily, even with a near-term recovery similar to that seen in early 2018.
Source: CryptoQuant
Dead Cat Bounce for Bitcoin?
Daily time frame
The daily chart shows a broader year-over-year consolidation. BTC is currently trading towards the lower end of this range and there is a high possibility that the price will bounce off and start a short-term rally, also known as the “dead cat bounce” scenario.
Furthermore, the daily RSI is showing an oversold sentiment in the market and it is currently trying to break the 30% level. Technically, just like February 2021, an accumulation phase is underway leading to a short-term uptrend. However, the risk of macro factors should be taken into account and if the price falls below the lower band things could turn out very badly.
Source: TradingView
4 hour time frame
In the 4 hour timeframe, the price of MA 50 and MA 100 was rejected many times. Rejection of the key downtrend line confirms this bearish momentum. To predict a bullish reversal, BTC needs to break these dynamic resistances. The most likely scenario right now is a consolidation phase in the $30,000 to $40,000 range.
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.
Join CoinCu Telegram to keep track of news: https://t.me/coincunews
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