Bitcoin Analysis for 25/02/2021
Today, bitcoin's price had a minor recovery from yesterday's 10% drop; however, we think this will be short-lived. In the past 24 hours, bitcoin gained north of 5% and is now trading around $50,000, according to CoinGecko. At its worst point in the day, the price went just below $48,000.
For now, we expect the price of bitcoin to continue to drop and to play a similar pattern to the last significant drop in early January 2021, after BTC/USD had a massive rally that broke its prior record price. Adding to that, we were correct in our analysis that $50,000 would be an essential support zone for bitcoin's price.
However, we remain quite bullish on the long-term price of bitcoin. The reason is linked to wealthy individuals and institutions buying loads of bitcoin. As Eva Szalay from the Financial Times reported today,
"Inflows into Grayscale have become a measure of institutional investment in the digital currencies market, with analysts tracking appetite for the shares as a proxy for bitcoin's growth in traditional portfolios. But the trade has raised the possibility that at least part of the popularity is due to the arbitrage trade rather than longer-term bets on the performance of bitcoin."
For now, we expect a continuation of the downtrend, and we think the price will break below $50,000 and move toward $48,000. Even in a worst-case scenario, there should be support around $41,000.
Adding to the above, notice how bitcoin's price almost touched the predicted range's top (blue) and right after decreased significantly. A reason could be the declining volume and the fact that sellers are now in control of the market. Hence, we do not expect bitcoin's price to reverse the current downtrend, at least not until the week's over.
In sum, even though BTC/USD remains above $48,000- a bullish sign - we think today or tomorrow the price will plummet towards $45,000. If it does not hold this level, then the next price point would be near its 20-day MMA, below $41,000.
As a reminder, we are confident that BTC/USD will reverse its downtrend soon and the long-term uptrend to resume right after. We remain bullish on BTC/USD as long as:
- BTC/USD remains above its 20-day MMA (red), 50-day MMA (green), and 200-day MMA (blue).
- BTC/USD doesn't drop below $45,000.
- BTC/USD daily volume goes above its 21-day Moving Average soon.
What Do Traders Think?
This week's first tweet comes from Willy Woo, a crypto analyst whose Twitter profile describes him as an on-chain analyst. This tweet adds to the previous we discussed.
In his post, Woo advises caution to all investors and traders. As he wrote:
"I'm cautiously optimistic on Bitcoin, but not ruling out another short-term drop."
Essentially, Woo admits he's optimistic about the short-term price of bitcoin; however, he realises a few indicators are pointing to a continuation of the correction in BTC/USD.
The most important indicator is that bitcoin's price is "Struggling to break out above $51.5k".
On the other side of the coin, Woo highlights how "Funding rates completely reset", and that bitcoin's price is "Holding $50k as support".
At the time of this writing, the $50,000 support barrier has been broken, which enlarges the probability of moving to lower price ranges.
If BTC/USD continues to drop, we think it could find support between $41,000 and $45,000.
The next post comes from The Wolf Of All Streets (Scott Melker), an investor, podcaster, and author of The Wolf Den Newsletter.
In his post, The Wolf Of All Streets shares a 60 minutes chart of bitcoin's price. The trader added a few price ranges that we think are critical in both support and resistance. Like Woo, The Wolf Of All Streets identified $50,000 is a vital support target for BTC/USD.
In case bitcoin breaks below this target, the next logical price range for support, according to The Wolf Of All Streets, would be around $48,000. After that, only close to $45,000 BTC/USD could find a high number of buy orders.
The Wolf Of All Streets also thinks that there is a significant probability that bitcoin's price continues to drop. He wrote:
"Nice bull div, meaningful bounce off of the lows."
that according to Investopedia, means:
"From a psychological standpoint, bull traps occur when bulls fail to support a rally above a breakout level, which could be due to a lack of momentum and/or profit-taking. Bears may jump on the opportunity to sell the security if they see divergences, dropping prices below resistance levels, which can trigger stop-loss orders."
He concluded that low buying volumes have been worse than expected.
Therefore, as we've been writing throughout the week, BTC/USD is "not out of the woods." yet.
The next tweet comes from Lucid, a full-time forex & crypto precision trader.
In their post, Lucid shares an exciting chart pattern that, so far, has been proving profitable. Still, remember that price history is not an indicator of future performance.
According to Lucid, there are five main points traders should look at to successfully identify the pattern described above.
First, the trader expects a significant dump, which is followed by a quick recovery.
Afterwards, he expects the price to trade within that second candle range, followed by a quick dip into the shadow area below the target range.
The last step is to wait for the price to move above the previous range and find support above this price region (red). Lucid adds that it’s common for the price to retest the support range before making a swift bounce.
The trader wrote:
“This is how I was able to catch the $30k #btc low back in late January”.
The last post of the week comes from CZ Binance, the CEO at Binance.
In his tweet, CZ reshares a post by Michael Saylor, Founder and CEO of MicroStrategy, a company that has been gobbling up bitcoin by using corporate debt.
In the original post, Saylor shared a famous quote by Peter Lynch, that according to Investopedia, is "one of the most successful and well-known investors of all time."
What Lynch means is that during corrections, many traders lose money trying to perfectly time the market. Especially when using high leverage.
In his post, CZ commented that "I bought #bitcoin in 2014, at an average price of $600. Went through many "corrections". Never sold. Doing fine so far."
We think he means that one of the safest strategies is to buy bitcoin and "hodl", which means never to sell.
Of course, that signifies that investors and traders won't be able to take out profits during long periods of time, which usually requires commitment and understanding of bitcoin technology.
Let's discuss how we think bitcoin's price will trade tomorrow.
Bitcoin Price Prediction
Today, bitcoin's price had a minor 5% recovery after dropping nearly 20%. At its worst point, it went below $48,000, but it quickly recovered. At the time of this writing, BTC/USD was trading around $49,600.
Yesterday, we wrote that we expected the price to keep moving downwards until it reached a low at around $48,000, before recovering above $50,000 That's precisely, even though the price did not reach the predicted bottom. Yet.
For now, we don't see a price reversal on the horizon, and we think the drop will only get steeper.
But soon after the storm comes the sun. Hence, by the end of the week, we expect BTC/USD to resume its uptrend and start moving towards $60,000.
How do we think the price will trade today? As shown in the above chart, we believe that bitcoin could top around $53,000 if new buyers enter the space. Still, that is highly unlikely. We think that short-sellers may continue to push down bitcoin's
price.
On the other hand, we don't expect the cryptocurrency to drop much below $41,000 due to the sheer number of buy orders located around this price region. Also, we doubt bitcoin moves below its 20-day Modified Moving Average (MMA).
To finalize, the Volume Profile Visible Range (VPVR) shows a high number of buy orders between $45,000 and $50,000, and then again at $41,000, which means BTC/USD should not go below $40,000, even if things go south.
As a reminder, we believe BTC/USD will most likely return to its uptrend in less than a week's time.
Posted Using LeoFinance Beta
