The price of Bitcoin (BTC) has been on a tear in recent months, always leading to a new peak at $ 24,200. However, BTC saw a correction on December 21 as the equity markets also opened in the red. The price of Bitcoin fell 6% on Monday, while the US dollar currency index (DXY) saw a strong bounce.
Such drops and uncertainties appear to be due to the emergence of a rolling coronavirus strain in the United Kingdom and, therefore, more horizon constraints, which could have a major impact on the markets, as was the case in March.
Bearish deviation playing out over Bitcoin
On the 4-hour chart, a bearish diversion shows the $ 24,000 breakdown to Monday’s low of $ 22,000.
However, when zooming out, this is still significantly higher than the price of Bitcoin three months ago, while such corrections are very common in bull and bear markets.
Therefore, such dips should not surprise experienced traders. As such, the levels to watch are shown in the chart above. But for the bearish divergence to solidify, Bitcoin’s price should decline the previous field of resistance.
If that declines at $ 23,400 to $ 23,600, more downside is on the table and the higher time frame levels will be tested as support. However, if this $ 23,400– $ 23,600 region breaks down, there is likely to always be a new peak before the end of the year.
$ 18,500 is crucial
The only level to watch out for Bitcoin at this point is the area around $ 18,500. This weekly level has many confluences around the previous highest and is the last consolidation region.
On the daily time frame, the recent high low stands at $ 17,500. In other words, the price of Bitcoin must maintain above this level on the daily time frame to remain bullish.
Interestingly, based on the weekly chart, a fall toward $ 12,000 would still give the chart a bullish outlook. However, such a correction would be significantly greater than any standard bull market correction of 20% to 40%. But even such a drastic 50% collapse would not necessarily break the bull market cycle and would present a great “buy the dip” opportunity.
Markets are in the mood for a DXY bounce
The DXY index is seeing a slight bounce at the beginning of this week, fueled by the market uncertainty previously mentioned.
As investors tend to seek security in times of crisis and uncertainty, such an event could push the DXY index even higher in the short term. This was seen during the crash in March, after which the unprecedented expansion of the balance sheet by the Dedicated Federal marked the peak of DXY.
Total market cap looking to retest $ 550 billion
The cryptocurrencies market total capitalization on the high region has always been rejected, meaning a correction could be on the horizon.
The total market cap chart often shows a better view of the state of the market than just Bitcoin. Therefore, a correction to $ 550 billion would put Bitcoin in the $ 18,500 region, the critical short-term support zone that must be held to avoid further disadvantage.
Altcoins may benefit, in particular, at the beginning of 2021if The price of Bitcoin may hold above $ 18,500 and begin consolidation from there. Until then, fears and uncertainties of coronavirus will likely continue to hamper the markets.
The views and opinions expressed here are those of the author nor do they necessarily reflect Cointelegraph’s views. All investment and trading moves involve risk. You should carry out your own research when making a decision.