Key takeaways:
- After almost one month of Bitcoin appreciation, the number one crypto recently faced a rapid correction.
- The pullback comes after Bitcoin struggled but failed to break through the resistance zone between $46,000 and $48,000.
- Currently, more significant support levels lie at $40,000 and $38,500.
The world’s most popular cryptocurrency has rallied by almost 30% during the last three weeks, climbing from just above $33,000 on January 24 to over $44,000 this week. The most significant breach was made on February 4, when Bitcoin jumped by more than 10% and confidently broke the $40,000 price level – for the whole time since then, BTC managed to trade above this psychological level. Nevertheless, Bitcoin’s price has recently tanked by 8% on February 17, and it seems that Bitcoin is now headed to retest the $40,000 support level.
What caused the market correction?
According to market analysis conducted by crypto research firm Delphi Digital Bitcoin’s recent rally has brought its price very close to a significant resistance zone. The analysis concluded that a major resistance zone lies between $46,000 and $48,000. The resistance zone is notable because of the confluence of daily, weekly, and monthly resistance lines within this zone.
This is important as market participants usually look for signs of a potential price ceiling, including a major resistance zone. Therefore, it was to some extent expected that experienced traders would take the profit and reduce their exposure as Bitcoin approached what clearly looked like a price ceiling.
Where are the support and resistance levels?
Currently, a major support zone lies around $40,000. The $40,000 support should withstand a minor bear market as besides being a place of several buy orders, this level also represents a psychological border. In addition, the Volume Weighted Average Price (VWAP) line anchored to the 2022 Yearly Open also lies within this zone.
Should Bitcoin tank through the $40K support, another support line lies at $38,500, which had previously acted as a resistance level. If we lose this support level, cycle lows would likely be revisited. However, if Bitcoin manages to bounce off the $40,000 support, significant resistance still lies at $46,000, $48,000, and then at $50,000.
What about the long run?
While the Bitcoin market is currently bearish and most technical indicators suggest selling, you should be aware that crypto markets are very volatile. What’s more, we have seen far greater volatility in the past. However, this does not change Bitcoin’s long-term prospects.
Looking at the big picture, both Stock-to-flow (S2F) model and logarithmic regression point to Bitcoin reaching a price of $100,000 in 2023. In addition, prominent on-chain analysts, like Willy Woo, are highlighting the fact that macro funds did not sell larger amounts of their BTC within the last three months, even during the period of extensive bearish momentum. Are your hands as strong as those of those crypto funds?
