Can we expect another dump?
There is a chance for further downside. If we do not take into account the fundamentals or cyclicality, and only look at the charts, we can see that the downside cannot be ruled out. Bitcoin has created a lower LOW after a long time. By this, it broke the structure that was being created for almost a year.
We have ended the movement at almost one of the strongest supports. Another problem is a fact that now, the strong support has been turned into a strong resistance. The 36 000 – 38 000 dollars for Bitcoin is extremely strong resistance, which can be hard to break up. There is even a good chance of opening a short position.
1D chart of Bitcoin, Source: Author’s analysis, tradingview.com
If Bitcoin moves back to this level, the temptation to open short positions might be severe. If we can move back to the channel or turn this resistance to a support, the situation can look brighter. However, if this does not happen, it is only a matter of time until BTC breaks below 30 000 USD.
Problem with 20 000 – 29 000 dollars
If that happens, Bitcoin can be in a big trouble. Between those two levels is a huge gap. After the price rise at the end of 2020, we only saw a huge upward move, which did not leave any important levels in this gap.
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This can be considered hugely negative, since it means that there are no supports from which Bitcoin can bounce back up. Also, charts tend to remember this information quite good. Thus, if we fall below 30 000 dollars, in case of a bigger panic we can tank down even to 20 000 dollars mark.
1W chart of Bitcoin, Source: Author’s analysis, tradingview.com
Conclusion
The current situation is far from ideal. Bitcoin is regularly coming down to 30 000 dollars mark and I believe this level has almost no chance of holding the support.
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