The bitcoin (BTC) price needs to break a critical resistance zone to revive its bullish trend. The crypto has been consolidating above $30,000 since its recent all-time high near $42,000. At the time of writing, BTC has risen back above $34,000. Currently, the correction is around 20% after the crypto managed to bounce from the $30,000 region multiple times.
Nonetheless, it is yet to be seen whether BTC’s price will start its acceleration once more or whether it requires more consolidation to build up its strength. Multiple periods of accumulation were seen last year, where BTC’s price ranged for a few months.
Such a period is required to create some strength for upside movement continuation. The key question is whether this range-bound construction will now yield similar results.
Major Downtrend Since Peaking At $42K
BTC/USDT 3-hour chart. Source: TradingView
The 3-hour chart indicates that there is a downtrend since the peak of around $42,000. The structure is formed using the lower lows and lower highs. In this instance, the lower highs
are marked in the grey marks and are considerable.
Hence, for any bullish reversal, BTC’s price needs to break through the key resistance zone located at $34,000 to $34,500, which was previous support. If this zone fails to flip into support once more, the market will consider it as a support/resistance flip which will increase the probability of more downside movements.
The BTC price has been testing the support zone at $30,000 for a considerable amount of time. When a level is tested multiple times, it becomes weaker. In addition to that occurrence is the weaker bounces from the $30K zone that have resulted in lower highs.
If $34K fails to flip into a support, the renewed test of the $30,000 zone may result in more weakness that opens the doors to a fall towards $26,000 and $24,000 levels.
21-Week Moving Average (MA) Is At $20K Currently
BTC/USD 1-week chart. Source: TradingView
The weekly Bitcoin charts show a clear confluence between the 21-week MA and support as the 21-week moving average served as a strong support zone for the whole bull cycle in 2017.
Another critical signal in the chart is the gap that has formed between the 21-week MA and the bitcoin price. After the gap increases, BTC’s price accelerates considerably and may be an indication that bitcoin is now becoming overvalued in the near-term perspective.
Mostly, the asset price returns to the mean to test the 21-week MA for support before it continues with its bull run. Today, the 21-Week MA rests at the $20,000 price level. That is also the previous all-time high and the eventual bottom for a correction as the market does not want to see the bitcoin price drop below the all-time high of 2017.
Nevertheless, the BTC price falling toward the all-time high of 2017 is not assured since most of the markets are eager to purchase at that price zone. A correction to $26,000 and $24,000 is still quite healthy and might be in line with any bull market correction.
Total Market Cap Consolidating Above Previous ATH
Total cryptocurrency market capitalization, 1-week chart. Source: TradingView
The general market cap of crypto is consolidating above the past all-time high of 2017. The level is unlikely to have another test for support. However, the total market cap may rapidly retest this zone located at $750 billion.
This test of the support zone would be expected and may happen because the market went on a nearly vertical trajectory in recent months. Also, a consolidation period is quite healthy and organic for a market to gain some strength for the rally to keep on.
A Possible Scenario For Bitcoin
BTC/USDT 4-hour chart. Source: TradingView
Taking into context the current downtrend in the markets, more downside is possible, which may eventually form a further rounded bottom. Additionally, February is mostly seen as a corrective period for the crypto markets meaning that the summer may see the resumption of the bull market.
If BTC’s price manages to break through the $34,000 zone sustainably, the next resistance level is located at $37,500, a previous lower high. After BTC makes another lower high, the possibility of a further drop down to the 21-week moving average rises.
These corrections can be quite painful for altcoins but may nonetheless offer massive opportunities for the latecomers to join.
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This is a syndicated post from https://www.cryptovibes.com/blog/2021/01/25/bitcoin-seems-ready-to-resume-bull-cycle-after-surpassing-34k/