The latest drop in Bitcoin (BTC) prices is gaining momentum. Since Tuesday, the price of Bitcoin has plunged by $7,500, sending markets into a tailspin. Is this just normal high volatility, or is Bitcoin’s price heading for a broader correction?
Volatility is a serious problem for traders
Life is filled with uncertainty for the average Bitcoin investor. Emotions for many can be like a roller coaster, as Bitcoin bulls typically take the stairs and Bitcoin bears jump out the window.
There are many factors behind the current decline in Bitcoin prices, such as the continued rise in Treasury yields, inflation concerns, and overall low investor sentiment.
However, is this simply because Bitcoin reached oversold levels and its correction was accelerated by volatility caused by long-term liquidations and possibly a large amount of market manipulation?
Bitcoin ETFs and likely many big buyers will need to buy BTC, and if a large number of leveraged traders can be liquidated, the price will drop to a cheaper level. This is best for these big players, who are arguably the first to benefit from market manipulation.
Standard Bitcoin retracement so far
The 4-hour chart for $BTC shows that the retracements on this move so far have been pretty standard. The 0.618 Fib level is a very healthy level to pull back from, and even if the decline extends further, the 0.786 Fib level at $93,700 would also be a good bounce level.
The major horizontal support at $84,000 converges with the 1.618 Fib as well as the rising 100-day moving average. Therefore, this will be the last support before a retest of the last bull run top at $69,000.
Nonetheless, a rebound from the current level of around $95,000 is entirely possible as this is also the middle point of the range that Bitcoin is currently trading in.
$93,600 is the foundation for the next leg up
Zooming in to the 2-week chart, we can see that there is a very nice horizontal support level at $93,600. If we go back to the previous short-term chart, we can see that this is aligned with the 0.786 Fib. Will the market structure continue to sit above this support level and will the next phase of the bull run use this as a platform?
At the bottom of the chart is the extremely important Stochastic RSI. Indicator lines pointing downwards on a high timeframe like the 2-week is not a good sign. They need to turn up for the bull run to continue. The midpoint of 50.00 acted as support during the 2017 bull run. It needs to do the same this time around or a deeper correction could be in the cards.