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Bitcoin (BTC) had a very volatile week, as the price of Bitcoin rose from $ 32,000 to $ 38,500 and fell back to $ 33,000 in 24 hours.
The initial spike at $ 38,500 occurred minutes after Elon Musk added #Bitcoin to his Twitter profile.
However, no follow-up to this price movement was seen on the charts, with Bitcoin falling significantly in the following hours. Currently, the $ 34,500 area is an important area of ​​resistance to cross if the market is to maintain the bullish momentum.
Failed $ 38,000 break resulting in drop
The critical levels to watch are highlighted in the graph above. Simply put, $ 38,000 must be spent to keep the rally going. Tipping this level to gain support opens the door to new, unprecedented heights.
However, the push could not be sustained yesterday. After the failure of the $ 38,000 level, the $ 34,000 level could not provide the much needed support for a new upward momentum.
Therefore, the “Elon Musk pump” can be considered an outlier, and the general trend continues. This is a downtrend from the high of $ 42,000 that will most likely continue unless the price of Bitcoin crosses $ 34,500 and returns it to support.
Dollar showing strength is bad news for Bitcoin
One of the main arguments for further declines in Bitcoin would be the recovery of the US Dollar Currency Index (DXY). This index shows potential trough formation as a bullish divergence is observed at the significant 90 point level.
After that, the bullish divergence will be confirmed by a higher low, indicating that a larger rise is likely.
Remarkably, the previous rally on the DXY index in September caused a 20% correction for Bitcoin. However, since that rally of relief, the DXY index has shown massive weakness, one of the important variables in Bitcoin’s huge price increase to $ 42,000.
However, February is not the best month for stocks. The same can be concluded about Bitcoin, as in February 2018 Bitcoin slumped to $ 6,000 after hitting its previous all-time high.
Therefore, a DXY rebound could also add to bearish sentiment for Bitcoin in February.
Bitcoin Dominance Index wants a rescue rally
Historical charts show the past behavior of the market with many cyclical patterns.
When Bitcoin’s dominance reached its peak in December, massive spikes were seen in the altcoin market. However, after such a huge rally, a healthy correction would not come as a surprise to test previous resistance levels.
These tests would mean a rebound for Bitcoin’s dominance in February, which could open the door to a huge race for the entire crypto market from March.
Critical Levels to Watch for Bitcoin
The critical levels to watch are easy to see in the chart above. First, the price of Bitcoin needs to recover from the $ 34,500 level as support to maintain the bullish momentum. If this happens, the $ 38,000 level will be retested. Most likely, this test will result in a breakout above $ 38,000 towards the all-time high.
However, if the price of Bitcoin cannot exceed $ 34,500, further downward momentum is likely, as the chart shows. From this perspective, the critical level to watch is the $ 30,000 region. If this fails to sustain support (after extensive testing already), I would expect it to drop to $ 25,000 and the 21 week MA.
The views and opinions expressed herein are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You need to do your own research when making a decision.
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