Bitcoin price is dropping back toward monthly lows, but analysts agree that the current range is a “buy zone.”
Bitcoin's (BTC) downtrend extended a few rungs lower on Dec. 3 after the price dropped under $54,000 and traders will note that the BTC/USD daily chart shows a notable uptick in sell volume.
Investors seem concerned at the emergence of a new COVID-19 variant and hawkish comments from the Federal Reserve. Meanwhile, veteran investment icon Charlie Munger added to the fire by comparing the price action in the crypto market to the dot-com era that ended with the bubble popping.
Here’s a look at what analysts have to say about the current market and what to be on the lookout for as 2021 begins to wind down.
Strong lower support at $52,000 to $53,000
The “listless” nature of Bitcoin's price action over the past few weeks was highlighted by crypto market intelligence firm Decentrader, who pointed to the choppy price action on lower timeframes and the evidence of a slow downtrend on high timeframes as cause for traders' increased fear “that the bull run may be over.”
The analysts suggested that once BTC breaks out of its current range, “the most obvious support cluster lies around $52,000 to $53,000” near the point where the price broke down during the May crash earlier in the year.
“Should we get a deeper correction then a strong support area lies around the 200DMA at $46,200 and at the lower support level of $44,300. To the upside, a significant resistance level lies at the round number of $60,000.”
Bitcoin and Ether are “on sale” at these levels
While many have been put off by the recent price action of Bitcoin, David Lifchitz, the managing partner and chief investment officer at ExoAlpha, suggested that “Bitcoin and Ether have been bought "on-sale" when they hit $54,000 and $3,900” for those who were able to scoop them up at those levels.
According to Lifchitz, the price of Bitcoin continues to be hampered by “the Mt. Gox liquidation saga” and he suggested that BTC investors are likely to “remain cautious ahead of the distribution expected sometime in Q1 2021.”
Lifchitz also highlighted the spread and impact of the Omicron variant of COVID-19 as a situation to keep an eye on as “a bad outbreak leading to lockdowns would definitely initially weigh on the market.”
Lifchitz suggested that this could possibly lead to another round of government stimulus, “which would increase global debt and weaken currencies against gold and cryptocurrency, while at the same time the funny money could be exchanged for immutable ones such as Bitcoin.”
“So after an initial panic-induced dip, cryptos could take advantage of such outcome if we refer to what happened previously, even if this remains highly speculative. We'll know in the next couple of weeks if Santa will come this year or if he will remain on lockdown with COVID!”
It's starting to look like September 2021 all over again
Insight into how the current price action is similar to a price pullback that happened earlier in the year was provided by analyst and pseudonymous Twitter user ‘Rekt Capital’ who posted the following chart showing this most recent drawdown along with the drawdown in BTC price that happened in September 2021.
Rekt Capital said,
“In September, BTC retraced -25%. This is when BTC investors got Extremely Fearful. Then BTC reversed to new ATHs. Now, BTC is down -23%. It's likely the Fear & Greed Index will show Extreme Fear very soon. Similar retracement depth. Similar investor sentiment.”
The overall cryptocurrency market cap now stands at $2.531 trillion and Bitcoin’s dominance rate is 41%.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.