A double top formation preceded Bitcoin's plunge below $48,000 on Dec. 28 with some analysts suggesting it could dip to $44,000 before resuming its uptrend.
It looks as though the year-end rally that many crypto traders had hoped for will have to wait until 2022, as Bitcoin (BTC) bears gained the upper hand on Dec. 28 and hammered the price of BTC below support at $48,000.
Data from Cointelegraph Markets Pro and TradingView shows that an early morning wave of selling broke through BTC support at $50,000 and was followed by a second wave in the early afternoon that dropped the top cryptocurrency to a daily low of $47,318 before bulls managed to stem the outflow.
Here’s a look at what several market analysts are saying about the reasons behind this latest correction and what to look out for as 2021 comes to a close.
A bearish RSI divergence prior to the reversal
Insight into the technical reasons for the year-end correction for BTC price was offered by options trader and pseudonymous Twitter user John Wick, who posted the following chart highlighting a bearish “fake out” as the price of Bitcoin began to reverse.
“We formed a double top that was clearly defined by bearish RSI divergence. Notice how price action trends up, while RSI was trending down. We also had a bearish Alpha Thrust & Squeeze fakeout.”
Possible dip to $44,000
Bitcoin’s continued struggles at the 21-week exponential moving average (EMA) was highlighted in the following chart from market analyst and pseudonymous Twitter user Rekt Capital. The weekly chart shows the difficulty BTC has had in breaking above the technical indicator.
According to Rekt Capital, the price action for Bitcoin is similar to a scenario that occurred back in May “whereby Bitcoin is experiencing a multi-week consolidation between the two bull market EMAs,” and the price could soon revisit the $44,000 level. He continued:
“Historically, BTC has performed downside wicks into the orange area during this red retest so there's scope for another revisit of orange.”
Waiting for a breakout above $52,000
Suggestions as to what traders should be on the lookout for in the days and weeks ahead were offered by analyst and pseudonymous Twitter user "Don Alt," who posted the following chart showing that Bitcoin is in a “pretty clean downtrend, for now.”
Don Alt indicated that there is not much to see with BTC continuing to trade in a range at these current levels. He is now waiting for a clear break above the first red resistance zone on the chart above, which is located near $52,000. Don Alt further explained:
“I start getting hopeful above $52,000, above $60,000 the raging bull market is back on. Until either of those happens, I'm gonna look for deep wicks and focus on other more exciting things.”
The overall cryptocurrency market cap now stands at $2.234 trillion and Bitcoin’s dominance rate is 40.3%.
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