This is a daily analysis by CoinDesk analyst and chartered market technician, Omkar Godbole.
Bitcoin The price recovery following Friday’s drop has been tepid at best, leaving prices dangerously close to the key support zone. The outcome here could set the stage for significant moves.
BTC recovered to $116,000 after Friday’s sharp drop, during which prices fell to nearly $105,000 on several exchanges. However, as anticipated, the recovery was short-lived and prices fell again to trade near $110,000 amid bearish signals from key momentum indicators.
According to the daily candlestick chart, the range of $107,000 to $110,000 forms a crucial support zone, identified by intraday highs from December to January and intraday lows from September. The convergence of these ups and downs suggests that both bulls and bears have struggled to assert control in this region, making it a crucial battleground for the market. Furthermore, the 200-day SMA is now around $107,500.
This raises a crucial question: what happens if the support zone between $107,000 and $110,000 does not hold? A possible breakout would indicate that sellers have gained the upper hand, exposing Bitcoin to a deeper sell-off.
The first support line in that case could be $98,330, the low recorded on June 22. Below this, attention would shift to the lower end of the ascending channel, currently seen around $82,000.
Warning signs of a possible liquidation
The recent price action within a well-defined bullish channel, drawn by connecting the higher lows of October 2023 and August 2024 with a parallel trend line to the March 2024 high, suggests overbought conditions and room for a deeper pullback.
Bitcoin’s bullish trend since 2023 has been mostly stable and sustainable, as evidenced by price movements contained within a parallel channel with a slope of approximately 45 degrees.
In recent weeks, bitcoin price has repeatedly broken above the upper boundary of the well-defined channel, indicating moments of excess exuberance or overbought conditions. These breakouts signaled moments of excess exuberance or overbought conditions, but they have been short-lived, with prices retreating quickly to suggest buyer exhaustion.
A deeper sell-off cannot therefore be ruled out. Note how prices repeatedly failed to establish a sustained foothold above the upper boundary in December-January. This repeated rejection eventually paved the way for a sharp decline, with prices falling to around $75,000.
That said, traders should watch for a bounce from the crucial support zone between $107,000 and $110,000. A strong bounce here, coupled with a quick invalidation of lower highs via a move above $116,000, could put BTC on track to challenge its all-time highs.
