Bitcoin prices fell on Monday after plunging more than 12 percent in the previous session as the U.S. dollar rebounded, hurting the flagship cryptocurrency’s safe-haven appeal.
Spot BTC/USD had fallen 11.61 percent to $33,739.39 per token at 0639 UTC, after hitting a record high of $41,986 on Jan. 8. Meanwhile, bitcoin futures listed on the Chicago Mercantile Exchange fell 12.97 percent to $34,360 per contract, indicating massive long liquidations in the last 24 hours.
The volatile crash left Bitcoin Superstar analysts guessing about the next price direction. Scott Minerd, who projected BTC/USD at $400,000 in the future, says the pair’s ongoing uptrend doesn’t look sustainable in the short term and points out that the price could plunge lower.
„The technical target of $35,000 has been exceeded,“ said the managing partner of Guggenheim Partners. „Time to take some money off the table.“
Meanwhile, prominent bitcoin bull Vijay Boyapati came to the defense of the cryptocurrency’s recent price correction, recalling that each of its volatile bull runs has historically featured downside moves of 30-40 percent.
The analyst commented that Bitcoin’s upward movement would resume once the coin finds a sessional support level (find a good entry now? (Go to buy bitcoin with credit card guide).
Boyapati’s prediction could come true as Bitcoin heads into a week where a new stimulus package will be unveiled. U.S. President-elect Joe Biden told reporters Friday that one of his priorities after being sworn in will be to spend trillions of dollars to boost the U.S. economy.
Fiscal deficits are favoring Bitcoin’s investment thesis. The cryptocurrency surged more than 900 percent when the U.S. Congress passed two stimulus bills worth a total of $3.2 trillion.
That reduced the appeal of the U.S. dollar and sent investors looking for safety in riskier assets, which benefited the top cryptocurrency.
Bitcoin’s technicals: bearish
Entering the realm of technical indicators, Bitcoin is showing symptoms of a short-term bear market.
This is mainly due to two factors: a stretched Relative Strength Index on a weekly time frame and an ascending broadening wedge. Bitcoin’s recent downward movement has neutralized the RSI to some degree, but it remains within an overbought range.
This suggests an extended correction to the downside.
Meanwhile, the Ascending Broadening Wedge is showing bearish reversal signals as price tests its lower trendline support for a potential negative breakout.
As the price confirms at least three repetitions of the upper and lower trendlines – both diverging from each other – this shows the sellers‘ ambitions to take control. On the other hand, buyers manage to bounce the price off the support line, but lose control after the asset forms a new high.
So, it seems that Bitcoin has just done something similar.
The cryptocurrency now has an 80 percent probability of breaking below the wedge – based on the overall performance of the pattern in traditional markets. If this move were to occur, the BTC/USD exchange rate would target the lowest point of the wedge as a downside target, which is $24,655.
Nonetheless, the pair could attempt a pullback from the lower trendline itself and then rise towards the upper trendline, followed by a breakout. On a breakout, it could also bounce off $26,375 or $29,891 (watch for volume spikes near these levels for confirmation).