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Why should a 30% drop in Bitcoin price come as no surprise?

November 9, 2020

The price rally for Bitcoin (BTC) stopped when Joe Biden was announced as the winner of the 2020 presidential election over the weekend.and had a decrease from $ 15,500 to $ 14,400.

However, Bitcoin continues to show strength. as it is back in front of the final resistance zone at $ 16,000.

This last endurance zone is the last major hurdle before a possible race to a new all-time high.. Withdrawal, however, is increasingly likely as the fear and greed index is currently at the same level as the high peak in summer 2019.

The weekly level at $ 16,000 should be a major drag

BTC / USD weekly chart. Source: TradingView
Why should a 30% drop in Bitcoin price come as no surprise?
Why should a 30% drop in Bitcoin price come as no surprise?

The weekly chart for Bitcoin shows the resistance zone at USD 16,000 as the final resistance zone before a new all-time high can be tested.

The weekly chart also shows the support levels if the price of Bitcoin begins to correct. A correction would be relatively healthy if it changes previous resistance levels to get new support.

If a correction is made, The weekly level around USD 11,600-12,000 should be viewed as a possible support zone. Such a correction would mean a retracement of around 30% of the Bitcoin price. A 30% correction is quite normalas happened a few times during the previous bull cycle in 2017.

The ‘Extreme Greed’ index is similar to summer 2019

The Crypto Fear Greed Index is a useful indicator for measuring current market sentiment. In extremely negative periods, the index uses the color red to denote general sentiment.

However, once general market sentiment has reached its bullish peaks, including euphoria, The number is approaching the maximum value of 100. The current number is 90, or “extreme greed”. This level has only been seen once in the history of this indicator from June 27, 2019.

That date was the real high of the year as the price of Bitcoin hit $ 13,700 and has since been corrected by 50%.

Therefore, several indicators and areas identify potential areas of resistance. suggesting a correction should come as no surprise.

Bitcoin dominance continues its rally in the fourth quarter

Weekly graph of bitcoin dominance. Source: TradingView

Bitcoin’s dominance continues to grow, as always in the fourth quarter of the year.

Historically, Bitcoin’s dominance peaks in December. After that, the first quarter of the year is an excellent time for altcoins.

Based on this historical fact, Despite the slight relief rally over the past few days, it’s still time to be careful with altcoins. If Bitcoin decides to consolidate to the $ 11,600 to $ 12,000 range, there is almost no chance that altcoins will rise in reverse with BTC.

In this perspective Bitcoin needs to create a construct with limited reach that gives altcoins room to catch up.

What’s next for the price of Bitcoin?

BTC / USD weekly chart. Source: TradingView

A very likely scenario would be a correction period after this impulse wave. Such a rebound would mean a stabilization and natural accumulation of markets rather than a continuous parabolic movement.

In this perspective, a massive drop in a candle that would quickly buy not unlikely. After that, the ideal scenario for the bulls would be to continue range and sideways, which would result in compression and build up towards a strong bullish breakout.

The best time to anticipate a possible uptrend for altcoins would be when Bitcoin has completed the correction.. Historically, the best time to enter the altcoin market is December and January. As such, traders should be on the lookout for a possible BTC retreat in the coming weeks in case history repeats itself.

The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading step is associated with risks. You should do your own research when making a decision.