Following its failure to break above the high, BTC has now dropped a total of 8% from its recent high to trade at $18,220. What are traders to expect from the price of BTC in the coming days?
Bitcoin has now broken below $18,500, which acted as a crucial support level for the asset. The new trading level now reveals a clear bearish divergence on the daily chart.
The next support levels are found at $17,655 (short-term) and $16,000 (long term). So, what triggered the rejection, and subsequently, the price correction of BTC.
BTC was repeatedly rejected as it looked to break its all-time high. With every failed attempt, traders were forced back to their technical charts to reassess their positions. According to Patrick Heusser, a senior cryptocurrency trader at Crypto Broker AG, the rejection repeated rejection BTC faced can be linked to the sell orders traders placed at around BCT’s all-time high.
There is evidence that the whales began cashing out their holdings, as BTC failed to break its all-time high. Ki-Young Ju, the CEO of CryptoQuant, explained that liquidation of BTC hit an eight-month high as the price approached $20,000.
Data source from Glassnode also confirms that whales are liquidating their digital assets. The accumulation pools have declined by 5% in the last 3 weeks, bringing the total BTC in reserves to 2,698,719.
The stock market is witnessing a potential sell-off which may be the cause of the price pullback in BTC. The ‘Smart money’ index hit a one-year low, on the 7th of December. It coincides with the beginning of the 7% price drop of BTC in the last 48 hours. With analysts at J.P Morgan Chase, predicting a decline in the stock market by January 2021, BTC traders are beginning to brace up for a potential short-term price pullback.
This price correction is projected to last for a couple of weeks in for of a retracement or a consolidation.
Regardless of the current price movement of BTC, the long-term trend of the market remains bullish. The Relative Strength Index (RSI) of BTC on the yearly chart is still around 75. This means that there is room for more market expansion before a long-term retracement.
Another factor that has always positively influenced the price of BTC is institutional investors. With the growing institutional interest in Bitcoin, after the retracement, Bitcoin could easily generate enough momentum to break the key resistance present at $19,500 and $20,000.
Bitcoin is currently experiencing a price correction largely because whales began selling as it hit levels just below its all-time high. A price correction is always necessary for a market to normalize after a rapid appreciation. After BTC’s correction, the potential for creating a new future high will be greater.