After a strong rally that pushed Bitcoin (BTC) over the $31,000 level, the largest cryptocurrency by market capitalization has lost its bullish momentum and retraced to its previous consolidation level of $28,400. The retracement has been accompanied by a decline in trading volume and a decrease in market sentiment, which has led some investors to question the sustainability of the recent uptrend.
Is The Bull Trend In Jeopardy For Bitcoin?
According to the trader and analyst under the pseudonym “CJ,” Bitcoin has faced weakness across its daily highs, indicating a potential reversal in its bullish trend. This has put pressure on bulls, who are now closely monitoring the price action to identify key support levels that must hold to avoid a further price decline.
One such support level is the $27,700, which has acted as a strong support floor for BTC. If the price were to break below this level, it could signal a shift in market sentiment and potentially lead to a further decline in price. According to CJ, if BTC fails to push higher from this level, it could be on the cusp of a significant correction since the lows of 16k.
Furthermore, CJ advises that investors, whether in a long position or not, should keep a close eye on the bearish price action within the 4-hour and 12-hour Fibonacci Volume Zone (FVG). This zone represents a potential resistance area where Bitcoin could face selling pressure and potentially reverse its bullish trend.
If a bearish price action is set up within this zone, CJ suggests it could be an opportunity for investors to enter a short position. On the other hand, if Bitcoin manages to close back above the $29,980 level, CJ believes that the cryptocurrency could be off to the races, indicating a potential continuation of its bullish trend.
Is Not All Bad News For BTC
CryptoCon, a prominent cryptocurrency analyst, has suggested that it may never see much lower Bitcoin prices than $28,000 ever again. This assertion is based on the VWAP (Volume Weighted Average Price), a technical indicator that measures the average price of Bitcoin over a certain period, weighted by its trading volume.
According to CryptoCon, Bitcoin has just broken above the VWAP, a bullish signal suggesting a potential reversal in the current trend. As long as this breakout is sustained in the short term, CryptoCon believes that previous market cycles indicate that the only thing that could take Bitcoin back below $28,000 is a black swan.
On the other hand, CryptoCon has pointed out that while Bitcoin has risen thousands of dollars without experiencing a healthy pullback, the 3 Week Bollinger Bands still indicate that a return to the upper band is likely currently at $35,790, as seen in the chart below.
According to CryptoCon, previous market cycles have shown that there were no large corrections until the upper band was reached, so if CryptoCon’s analysis is correct, it could suggest that Bitcoin is entering a new phase of its market cycle, which could potentially lead to further price and investor interest increase.
Featured image from Unsplash, chart from TradingView.com