The price of Bitcoin has been trapped in a consolidation range between $18,000 and $25,000 for months now, trading sideways with extremely low volatility. However, the primary cryptocurrency is now closer to the lower bound of the $18,000 range and if that level breaks, we can expect fresh yearly lows.
Technical Analysis
By Shayan
The daily chart
The chart below shows that the market is suffering from insufficient activity and lack of demand. As a result, price movement has been small, with low volatility, making trading difficult.
From the bullish side, BTC is trapped below two critical resistance lines: the 50-day moving average at the $19.6k level and the 100-day moving average around $21,000. Bitcoin needs to break through these crucial levels with significant trading volume to re-enter higher levels.
However, considering the current bearish market situation, the price could be rejected to make new yearly lows (below USD 18,000).
The 4 hour chart
Looking at the shorter timeframe, price action has been trapped between $18k and $20.5k since mid-September. Meanwhile, Bitcoin has formed a bearish wedge pattern (as seen on the chart below).
After a steady decline from $20.5k, the price touched the lower trendline of the wedge and quickly recovered on Thursday amid the CPI data release.
Looking ahead, BTC’s next direction is likely to be determined by the breakout direction of the wedge. If there is a bearish breakout, the market could drop to targets in the $15,000 area. On the other hand, if the price breaks above the wedge, the market will potentially surge due to a large short squeeze event.
onchain analysis
financing rates
The perpetual futures market significantly influences the short-term price action of bitcoin. As a result, it could be beneficial to gauge futures market sentiment, and one of the best metrics for doing this is funding rates.
Simply put, funding rates indicate whether futures traders are generally bullish or bearish on Bitcoin’s upcoming price action. Negative readings indicate bearish market sentiment, while positive readings indicate bullish sentiment.
Currently, funding rates have turned negative again as the price has fallen off the $22,000 level and is consolidating above the $19,000 support. This suggests that futures markets are predicting Bitcoin to make new lows.
However, the values of the key figure are significantly lower compared to the years 2019 – 2021. This indicates a massive lack of demand and activity on the futures market and is typical of consolidation phases.
The metric should be followed closely in the short-term as potential extreme negative readings increase the likelihood of a short squeeze, which could result in a reversal in Bitcoin price sentiment.
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