After falling $1.4K in a week Bitcoin’s bullish trend appears extinguished but finding support at the 21-WMA could reopen the path to $10.4K.
This week the equity markets experienced their worst week in 12 years and as this meltdown took place the crypto market also took a hit.
Bitcoin (BTC) and the cryptocurrency market saw a significant selloff this week and this outcome is relatively reasonable given that people sell their assets out of fear of potential economic instability. Other safe-haven assets like gold and silver also saw a massive selloff on Friday.
Are the crypto markets going to find support in the coming weeks, or will we see a continued downtrend in momentum?
Crypto market daily performance. Source: Coin360
Selloff ensues after Bitcoin lost key support at $9,400
The price of Bitcoin found resistance at the $10,400 level, after which a test of the $9,400 support was heavily needed. The $9,400 level was unable to provide sustainable support and as the price fell through it this caused a significant selloff throughout the crypto market.
BTC USDT daily chart. Source: TradingView
The sell-off led to the next support area at $8,200-8,400 and many horizontal levels are lining up here, providing potential temporary support and space for a relief rally.
However, for the short term, many believe that the upwards momentum is out of the markets as the price of Bitcoin is making a lower low (a key indicator for downwards momentum) on the daily timeframe.
Does this mean that the entire crypto market will reverse course and enter a bearish trend? Not at all. The price of Bitcoin is still 27% higher as on the 1st of January, which makes Bitcoin one of the best-performing assets of the year.
Weekly chart brings focus to the 21-Week MA
BTC USD 1-week chart. Source: TradingView
The weekly chart is currently resting on an exciting MA (Moving Average), namely the 21-week MA. The previous bull cycle held this level as support towards the bull peak in December 2017, which makes this an interesting indicator for bulls to hold on to.
If the price could find support at this level, it could mean a continuation of bullish momentum in the coming period.
BTC USD 1-week chart. Source: TradingView
The weekly chart also clearly shows the massive selloff of the past week. However, it’s currently resting on potential support. Holding the green zone around $8,400 would line up with the 21-WMA and possibly grant a relief rally.
For sustained upwards momentum, it’s crucial that a breakthrough of the past high at $10,400 takes place but such a move could take some time. The market must find support before these levels can be targeted.
If Bitcoin price can’t find support at $8,400, the next level to target is at $7,500-$7,700.
Total market capitalization searches for support
Total market capitalization cryptocurrency chart. Source: TradingView
The total market capitalization for cryptocurrencies was unable to break above $300 billion and also couldn’t find support at $250 billion so further downwards momentum was expected.
Currently, an exciting level is approaching as the 21-WMA is also showing up on this chart. Through the whole bull cycle of 2016-2017, the 21-WMA granted support on the total market capitalization as a whole. Providing support in this area would give bulls arguments for upwards momentum.
Aside from the 21-WMA, a crucial horizontal level can be seen here. During 2018 and 2019, the market capitalization found support at the $225 billion level several times. Showing support here would grant potential upward continuation, as the total market capitalization had been making higher lows since the bottom in December 2018.
Are altcoins close to bottoming out?
Total altcoin cryptocurrency market capitalization chart. Source: TradingView
The altcoin market capitalization shows a similar outlook as the rest of the market. There was a massive rejection at the horizontal level at $115 billion, through which the altcoins are searching for support also.
The next significant level is found around $73-$75 billion, which is similar to the $225 billion of total market capitalization. Since the bottom in December 2018, altcoins have been consistently made higher lows, warranting a new upwards trend to occur. Finding support around the $73 billion levels would warrant another higher low and potential continuation upwards.
The bullish scenario for Bitcoin
If the scenario turned bullish, a relief rally towards $9,200-9,400 would be the first step. To do this, Bitcoin price needs to find support at $8,250-$8,400 in order to sustain some upwards momentum to retest previous support levels for resistance.
BTC USD 12-hour bullish scenario chart. Source: TradingView
The next important question investors will ask will be: Can Bitcoin price break through the resistance and continue its upward momentum? If the answer is no, a likely retest of the $8,200-$8,400 area is next to occur.
However, breaking the resistance around $9,200-$9,400 and making it support would open the door for a move to the next levels near the $10,400 highs of two weeks ago.
And finally, finding support around this area would confirm the 21-WMA to be supported again, which is a massive indicator for bull/bear momentum.
The bearish scenario for Bitcoin
BTC USD 4-hour chart. Source: TradingView
There’s no clear guideline for a bearish scenario at this point, but the chart is showing several perspectives. What traders should look for are potential bearish retests. If the price of Bitcoin rallies upwards without any volume and rejects at $8,950 or even $9,175, a bearish retest is confirmed, and the price should trend further down.
If such a bearish retest occurs, the price will likely retest the support around $8,200-$8,400 one more time.
However, the more support gets tested, the weaker it becomes. Heavy retests of this support would typically induce further continuation downwards to $7,500-$7,700 as the next primary support after this zone.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
