Since the 20% drop on Monday Feb. 22, the price of Bitcoin (BTC) is ranging between $48,000 and $51,000, struggling to break out of the current resistance at $51,600. If this struggle continues in the near term, technical analysts predict a high probability of a correction.
The key level to watch is $51,600
Crypto trader and technical analyst, Josh Olszewicz, has named $51,600 as the current acting strong resistance level. He explained that Bitcoin needs to move past this price level for it to retest the all-time high of $58,000 and initiate a potential rally towards $62,000.
Therefore, a rally beyond $51,600 is the absolute nullification point for any short-term bearish scenario for Bitcoin. If the asset fails to break out of the level, there could be a bearish test of lower support areas which are around $42,000.
Olszewicz went ahead to say that if 4h breaks down, the market should be prepared for some uber bearish calls to start popping at 36.7k.
alternatively, if $BTC breaks above 4h Cloud at 51.6k, i like
ATH retest @ 58k
R3 yearly pivot test @ 62k
macro PF diag test @ 70k
R4 yearly pivot test @ 80K
seasonality suggests we go neutral/sideways through March and then reach for those higher targets in Q2 pic.twitter.com/rIZHu2MbHy
— Josh Olszewicz (I will not dm you) (@CarpeNoctom) February 25, 2021
The $42,000 support level has been marked as important since it is the top of the previous rally, which happened on Jan. 8 on Binance, reaching $42,085 and causing a steep correction afterwards. However, a drop of BTC to $42,000 to retest the previous top as a support area would not automatically be bearish beyond the short term.
Whale groups indicate similar support levels
Analysts at Whalemap have noted large inflows of Bitcoin to whale wallets at $48,500 and $46,500 which they say should offer BTC with some support. They said that the current situation is similar to the one in January at $29K which held support during the then correction before the rally continued.
Its time to pay attention to supports. Inflows to whale wallets at $48500 and $46500 should provide BTC with some support. $55400 is an important level to keep an eye on as well. Getting back above it will be a good sign,. pic.twitter.com/eW7uznqoOf
— whalemap (@whale_map) February 22, 2021
They also added that $55,400 was an important level to keep an eye on, as getting back above it would be a good sign for Bitcoin.
Arguments for a short-term Bitcoin drop
It is market knowledge that Bitcoin tends to seek liquidity after a prolonged consolidation. Therefore, it can drop to fill orders at lower support levels that can lead to a new rally.
Salsa Tekila, a pseudonymous trader, echoed this sentiment on Twitter, writing that there was a big support at $41,000 and resistance at $54,000 and depending on context, he might trigger swings around those two levels.
Although Bitcoin tested the $44,800 support level in the last 72 hours, it was not enough to propel it above $51,600. This trend could cause a drop back to the $44,800 support level or a lower one at $42,000.
Currently, the optimal situation is for BTC to hold onto the $44,800 support level if it drops below the current price above $50,000, making it a macro support level, and move back up.