After reaching a new all-time high of about $ 42,000 and a 20 percent decline, the bitcoin price remains in a limited channel between $ 32,000 and $ 35,000. Against this background, traders started talking about the formation of the so-called “crossfire zone” (eng. – kill zone), characteristic of the markets foreign currencies, when certain setups appear on the hourly chart, depending on the time of day.
Increasingly, one can come across suggestions that the BTC / USD pair is forming a classic “head and shoulders” pattern, where in case of a breakout of support at the “neck” level, the price will go to lows around $ 20,000.
“The head and shoulders pattern can develop literally at any time frame. However, most traders believe that patterns that form on longer timeframes are more significant and more likely to mark a significant reversal, ”explains broker Charles Schwab.
Others see a wedge on the charts, maintaining support in which still allows them to count on a bullish continuation of the trend.
“Bitcoin will not go below $ 32,000 as long as the uptrend continues,” the trader says, drawing the potential for a return to $ 40,000.
The CEO of the analytical firm CryptoQuant, Ki Yong-chu, believes that a deeper fall in any case should not be expected. He draws attention to the outflow of cryptocurrency from the Coinbase exchange on January 2, presumably related to the actions of institutional investors.
“If these guys are behind the last rally, they will defend the $ 30,000 level. Even if the decline goes, it will not cross the $ 28,000 level,” he writes.
In the subsequent period, however, withdrawals from Coinbase slowed down, while deposits, on the contrary, accelerated. On Tuesday, the number of coins on exchanges surged by over 57,000 BTC, the largest increase since the market crash in March 2020. According to BitInfoCharts, the top 100 bitcoin addresses have increased their assets by 16% in the last 30 days. This is equivalent to 334,000 BTC or $ 11 billion at current exchange rates. At least 10 of them are owned by major exchanges such as Huobi, Binance, Bittrex, and Kraken.
Traders also turn to another technical analysis tool – the Ichimoku cloud. It helps to identify support and resistance lines, as well as other important variables such as trend direction and momentum strength.
“As long as bitcoin is trading below the Ichimoku cloud, I can still see continued downward pressure in the short term,” said Patrick Heusser, head of trading at Crypto Finance AG.
An analyst at Cheds has a different opinion:
“Given the recent rise in Bitcoin’s popularity, there are many new investors and traders who have not yet had to go through the shocking events like the last $ 8,500 decline in one day’s candle. As long as institutional accumulation continues, and daily movements are decreasing, the upward bias of bitcoin should persist and, in my opinion, all declines should be bought off. ”
One analyst notes that a 20 percent correction is a common situation in the bitcoin bull market.
“Institutional investors are looking far ahead and will absorb short-term price shocks,” says Jehan Chu, managing partner at Kenetic Capital, adding that retail investors will buy lows at the same time due to the loss of profits syndrome. “Expecting temporary volatility, and then a rise back to the $ 40,000 level, followed by $ 50,000 as bitcoin dominance increases.”