Bitcoin Price Analysis: Understanding the BTC-USD Price Correction

Bitcoin Price Analysis: Understanding the BTC-USD Price Correction

Note: This analysis does not attempt to speculate on the market implications of news events. This is a unspoiled analysis of the market data.

The unprecedented rise in the BTC-USD market to near $Trio,000 even caught many of the more bullish traders by surprise. However, this quick rise in value did not come cheaply: once BTC eventually ran out of steam, the market correction not only affected BTC-USD prices, but it was felt across the entire crypto-space as entire market cap took a massive plunge from $49B to $36B over the course of three days.

Figure 1: Market Cap Pre–Bitcoin Price Correction

Figure Two: Market Cap Post–Bitcoin Price Correction

Why Did This Massive Price Correction Happen and Where Are We Heading?

There are two ways of viewing the BTC-USD run to near $Trio,000 levels:

The top can be viewed as the absolute top of the market ($Two,948)

The top can viewed as the peak at $Two,726.50 with a healthy one hundred twenty seven percent Fibonacci Extension

I’m going to analyze the market from the view of option two because I feel this provides a more sober outlook on the direction of the BTC-USD market. In strong Bull Runs, it is very common for markets to take a fifty percent correction; a one hundred percent Retracement of the initial downward budge (if it’s a very strong Bull Run), followed by a one hundred twenty seven percent Fibonacci Extension will provide another test to see how the market feels in the fresh market highs. In our case, we didn’t fairly make it to the one hundred twenty seven percent Extension (shown in orange in Figures three and Four).

Figure Three: BTC-USD, GDAX, 6-hr Candles, the Relative Market Top With Accompanying Extension

Figure Four: BTC-USD, GDAX, 2-hr Candles, Failed one hundred twenty seven Percent Fibonacci Extension

Presently, BTC-USD is finding support on the fifty percent Fibonacci Retracement of the Bear Run from $Trio,000 (labeled in green). It made a test of the sixty one percent line (labeled in crimson) and it was ultimately rejected. This rejection and subsequent support test of the fifty percent line coincides with a decrease in volume and a near spin of the four-hour MACD from Bullish to Bearish (labeled in yellow). These market moves showcase that, unless significant volume hits the BTC-USD markets, there is a likely test of the lower Fibonacci Retracement Lines in its future.

Figure Five: BTC-USD, GDAX, 4-hr Candles, Fibonacci Retracement of Bear Run

After our initial market high around $Two,700, numerous momentum indicators began to expose that, albeit the price was enlargening, the market was beginning to lose upward momentum — this type of price activity is called “Divergence” and can be seen across the RSI, MACD and Volume. The long-term outlook for BTC-USD indicates a possibility of lower lows in its future. On the higher time-scales (refer to Figure Trio), the momentum indicators are pointing toward more downward movement as the price is presently failing to make a fresh high and watching decreased market volume. It’s totally possible that the market could budge sideways or even see price growth on decreasing volume — markets aren’t always rational. However, if you want to know whether the price growth is sustainable and reliable, keep an eye on the momentum indicators and see for volume to accompany price growth in the coming days. For the time being, I find it very unlikely that BTC-USD will see any significant price growth. But, after all, this is cryptocurrency; anything is possible.

Summary:

Short-term indicators are displaying a possible budge to the lower Fibonacci Retracement values ($Two,500, $Two,400, $Two,280).

Long-term indicators are demonstrating a loss of upward momentum. Until more volume hits the markets, very little price growth is likely.

Trading and investing in digital assets like bitcoin and ether is very speculative and comes with many risks. This analysis is for informational purposes and should not be considered investment advice. Statements and financial information on Bitcoin Magazine and BTCMedia related sites do not necessarily reflect the opinion of BTCMedia and should not be construed as an endorsement or recommendation to buy, sell or hold. Past spectacle is not necessarily indicative of future results.

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