In the latest video published on December 21, cryptocurrency analyst Rekt Capital attempted to answer the question, "What is the worst-case scenario for Bitcoin right now?" After reaching a new all-time high of $108,374 on December 17, the BTC price has dropped over -11%.
What price levels could Bitcoin drop to?
Rekt Capital provides a historical perspective on Bitcoin's price pullbacks, emphasizing the historical significance of weeks 6, 7, and 8 in the "bullish price discovery trend." Based on previous cycles like 2013, 2016–2017, and 2021, he explains that Bitcoin tends to experience strong corrections during these specific timeframes, with some drops reaching as high as 34% or even more.
"Understanding these weeks is crucial as they tend to cause issues for Bitcoin," Rekt Capital states, referencing previous cycles when significant declines occurred during this timeframe. For example, in the 7th week of the 2013 cycle, Bitcoin experienced a sharp 75% pullback over 13 weeks. Similarly, the 2016-2017 period saw a 34% decline in week 8, highlighting the recurring vulnerabilities during these specific weeks.
As of the current cycle, Bitcoin has experienced a 10%+ pullback, bringing its price into a historically significant support zone at $96,537 on the weekly chart. Rekt Capital emphasizes the importance of this support level, noting that, "This historical support area has allowed for a move to $108,000." He warns that failing to maintain this support level could lead to a more severe correction down to $89,830.
Considering the price action over the past few days, Rekt Capital points out the appearance of a bearish engulfing candle on the weekly timeframe—a technical indicator often associated with the potential for a reversal. He notes, "We are losing resistance levels that have turned into support levels." This loss signals the potential for a shift into a correction phase as the price struggles to maintain an upward trajectory.
Rekt Capital also points out the importance of maintaining the 5-week technical trend in his analysis. "If we lose this 5-week technical uptrend and the orange trend line, it will be increasing evidence that we may be transitioning into a correction phase," he warns.
Furthermore, he addressed the CME gap between the price levels of $78,000 and $80,000, a significant area that has yet to be filled. Rekt Capital notes that "Diving deeper into a 26%, 27%, 28% decline could fill the entire CME gap."
Traditionally, CME gaps tend to be filled, while some gaps have never been filled. Despite any warning signals, Rekt Capital maintains a bullish long-term stance, stating, "These pullbacks are what facilitate future bullish trends during the parabolic phase of the cycle." Drawing from previous cycles, he illustrates how traditional corrections have provided the necessary "rest time" for the market.
For example, in the 2021 cycle, Bitcoin experienced a 16% drop in week 6 and an 8% drop in week 8, but the overall trend continued to rise. Similarly, the current 10% pullback, while significant, may serve as a preparatory phase for the next stage of price discovery.
DYOR! #Write2Win #Write&Earn $BTC