The current market situation is explained by Nikita Semov, a practicing trader and founder of the project Crypto Mentors.
In the past week, Bitcoin has fallen more than 25% in value. What is this: a trend reversal, a modest correction, or manipulation to trigger liquidations? We will try to unpack it and identify the most likely scenarios.
First, the price touched an important buyer’s level, namely $42 000. This is not only a horizontal level visible even on the weekly timeframe, but also a zone of downside development. For the latter, there is relatively low trading volume due to strong pressure from one side (in this case buyers).
When approaching the zone, unusually high volumes emerge, signaling interest at these price levels. However, cluster analysis does not yet confirm substantial buying, ruling out a V-shaped reversal.
In the context of longs, the most probable scenario is building a balance, a false downside breakout, and then a reversal. This scenario is also supported by the dynamics of the cryptocurrency Fear and Greed Index, which is at 21.
The current support level cannot be described as “ultra-strong”. The conspicuity of the $42 000 horizontal level points to many non-professional participants in the market. This could move price toward the truly strong level of $34 000, from which a strong buyer reaction can be expected.
In the context of the global situation we can observe the so-called POC shift, indicating the start of a correction. So far, the correction has not occurred even 50%. Given the uptrend in recent weeks, we are not in an extremely strong bullish trend that would suffice a 20–30% pullback.
The 50% Fibonacci zone coincides with a strong buyer volume array with a POC at $34 000. The chance of a significant buying reaction from these marks is very high.
Two priority scenarios can be identified for now:
- buying reaction from current price levels;
- buying reaction after a false breakout to the $34 000 level.
For a reaction from current levels, the following is necessary:
- forming a balance in the range $42 000-$45 500;
- false expansion downward to capture liquidity;
- wash-out of accumulation to the upside with a break above $47 000.
For the false breakout scenario the following is necessary:
- active resumption of selling after a mild correction;
- overcoming the level $42 000 and holding above it;
- approaching $34 000 and the appearance of a strong buyer reaction.
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