Look out below! Analysts eye $40K Bitcoin price after today’s dip to $45k

On Monday, Bitcoin’s short-term outlook worsened after the price fell to an intra-day low at $45,672, a far cry from the weekend’s promising rally above the $50,000 level.

With the year nearly complete, and all-time highs nearly 33% away, traders are most likely readjusting their expectations and pushing the $100,000 BTC target a bit further into 2022.

Daily cryptocurrency market performance. Source: Coin360

Day traders, 4-hour chart watchers and over-leveraged longs are likely freaking out (unless they went short from $50,000 over the weekend or at this morning’s weakness), but let’s zoom out a little bit to see where Bitcoin price stands.

BTC/USDT daily chart. Source: TradingView

On the daily timeframe, we can see the price struggling to breakout away from the trend of daily lower highs and aside from the Dec. 4 drop to $42,000, traders appear apprehensive to buy into the most recent dips.

Tracking moving averages has always been a relatively simple way to swing trade BTC and currently the 20-day moving average (blue) is below the the 50-day MA (orange). Some traders simply buy when an asset secures a few daily closes above the 20-MA and sell when the price falls below it because this is a sign that the short-term trend is weakening.

Following this practice, momentum traders might wait for BTC to secure a daily close above the moving average at $53,000 before opening new long positions. More risk averse traders might consider waiting for convergence between the 20- and 50-MA as a clearer sign of a trend reversal. Taking a quick look at the last year of price action proves that the strategy is pretty effective.

Why some traders expect more downside

More experienced traders know that Bitcoin price has a tendency to make double tops, M-tops and head and shoulders patterns after hitting new all-time highs. Lately, analysts on crypto Twitter have pointed to what they perceive to be a double top, which is a clear trend reversal pattern.

BTC/USDT daily chart. Source: TradingView

Looking at the daily time frame, we can begin to see what looks like the start of a head and shoulders pattern. The current dips and following consolidation could eventually complete the right shoulder, with a neckline at $41,500, and a price target near a number so unbelievably low that it won’t be written here.

Traders will also notice that the neckline of said head and shoulders pattern aligns with a wide gap on the Volume Profile Visible Range (VPVR) indicator, which shows increased buying interest right at the $40,000 level.

At the moment, it’s too early to make too much fuss about the existence of a H&S pattern, especially since analysis of price action cannot be determined by a single indicator, but it is still something worth noting.

Data from an on-chain analysis outlet, Whalemap, also pinpoints the $40,000 level as an area to watch closely. While speaking to Cointelegraph, Whalemap co-founder Andy Bohutsky said,

“Basically, if we start closing daily candles below the support outlined above, we will probably go to a lower one. The closest below us is around $40,000.”

While Bitcoin’s current price action does little to inspire confidence in traders who bought higher or expected price to trade in the $74,000 to $80,000 range in December, analyst Mohit Sorout recently pointed out that phases of negative funding have proven to be great buying opportunities.

Via: CoinTelegraph

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