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Market sentiment around Bitcoin (BTC) is mixed, as the price of BTC almost immediately dropped 10% immediately after hitting its previous all-time high of $ 19,892 on December 1st.
However, some analysts and fund managers predict the dominant cryptocurrency will rise above $ 20,000 in the short term. But others are adamant that there will be another correction first, as seen in previous bullish cycles.
Bitcoin sees a “minor” 10% drop
There are many compelling reasons to believe that a deeper Bitcoin correction is coming. In the past, multiple pullbacks from 30% to 40% have accompanied major upward trends as in 2017. Thus, the current BTC correction of around 10% from the new all-time high is relatively minor in comparison.
Meanwhile, Mohit Sorout, the founding partner of Bitazu Capital, argues that Bitcoin may soon enter a larger, multi-month rally. He pointed out that BTC’s medium-term outlook remains highly positive despite the price failing to break the key $ 20,000 psychological barrier on its first attempt.
The bitcoin price was rejected just before $ 20,000 with a strong reaction from sellers across the spot market. As Cointelegraph reported, on-chain analysts attributed the decline to a combination of miners and whale sales.
The futures market also took a hit after the initial market-driven sell-off. The derivatives market was already overheated prior to the decline, hitting $ 23,000 on the Chicago Mercantile Exchange along with a hike in the BTC futures funding rate and a record Fear and Greed Index of 95.
Since the market has been oriented towards buyers, this means that if a smaller decline occurs, the likelihood of a larger decline caused by cascading liquidations was high. This resulted in the drop causing BTC to bounce off the $ 18,000 support area.
Is Bitcoin Now On The Brink Of A Major Breakout?
However, some analysts now expect BTC to exceed $ 20,000 on the next attempt.
In particular, Sorout identified the Relative Strength Index (RSI) of the 1-month chart of Bitcoin. It shows that despite the recent uptrend, the RSI is at 69 which is neutral. An asset becomes overbought if it exceeds 75 on the RSI indicator. He said:
“Zoom out and I couldn’t help but notice that Bitcoin is at the height of a very special multi-month rally.”
Additionally, a pseudonymous cryptocurrency derivatives trader known as “Flood” echoed this sentiment. He said a strong rally after an all-time high fakeout is not unlikely. He he wrote:
“The ATH fakeout followed by a real ATH would be a classic. Craved BTC here 18800. “
The possibility of a BTC price correction persists
Other traders, however, believe the likelihood of a correction would continue to rise if Bitcoin consolidates below $ 19,000.
Michaël van de Poppe, a full-time trader at the Amsterdam Stock Exchange, said weakening momentum increases the likelihood of a pullback.
The likelihood of a correction is slowly increasing. $ BTC
– Michaël van de Poppe (@CryptoMichNL) 2 December 2020
Technically, it could be argued that BTC’s bull run is indeed overextended. After the last two minor pullbacks, lower timeframe charts, such as the four-hour and one-day charts, show that Bitcoin is moving well above the short-term moving averages, or MA. This means that BTC is not overbought on lower time frames.
However, on the weekly and monthly chart, Bitcoin is still significantly above the short-term MAs, indicating that a large correction could occur.
As Cointelegraph reported, some traders have said that a correction to around $ 13,000 shouldn’t come as a surprise for this reason, as previous bullish cycles have shown. If BTC falls further, the major support areas should be found at $ 13,000, $ 13,800 and over $ 15,000 in the high timeframe rankings.
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