After a significant downturn in the cryptocurrency market, Bitcoin has seen a sharp decline, breaking through the key support level of its previous major swing low of $53K.
This price movement indicates a possible shift towards a bearish market structure.
Technical Analysis
By Shayan
The Daily Chart
A detailed examination of Bitcoin’s daily chart reveals a significant downturn driven by widespread fears of potential economic turmoil. Since Friday, increased selling pressure has led to a sharp decline in BTC’s price, causing it to break below the 200-day moving average at $61.1K and its prior major swing low at $53K.
This breakout is a strong bearish signal, suggesting a potential shift in market structure towards bearishness, as it marks a new lower low on the daily timeframe.
This movement indicates that sell-side liquidity, which was resting below the $53K level due to stop-loss orders from earlier long positions, has been activated, triggering a long-squeeze event.
With the perpetual markets cooling down and deleveraging, there is now a greater likelihood of a mid-term consolidation phase. Therefore, in the coming days, Bitcoin’s price is expected to fluctuate between the $53K and $60K levels.
The 4-Hour Chart
On the 4-hour chart, the intensity of the sell-off is evident as Bitcoin’s price cascaded through several critical support zones, including the $60K psychological level and the crucial $53K mark.
However, this sharp decline has effectively flushed out most of the long positions in the futures market, leading to a temporary halt in bearish momentum when the price reached the lower boundary of a multi-month wedge pattern around $50K, causing a slight rebound.
Given the impulsive nature of the recent downtrend, the market may require a corrective phase in the near term.
The key targets for this correction lie within the Fibonacci retracement levels, specifically between the 0.5 ($62K) and 0.618 ($59.5K) levels. In the short term, Bitcoin is likely to remain trapped within the $50K to $62K range, potentially consolidating sideways until the next significant move occurs.
On-chain Analysis
By Shayan
Bitcoin’s price has experienced a significant decline, struggling to maintain its upward momentum. A key factor behind this recent drop could be the selling activity in perpetual markets and a long-squeeze event.
The accompanying chart highlights the funding rates, a crucial metric for assessing sentiment in the futures market. This metric shows whether buyers or sellers are executing more aggressively (taker orders) overall. Positive funding rates indicate bullish sentiment, while negative rates suggest bearish sentiment.
Recently, the funding rates have dropped sharply, indicating that the decline was driven by aggressive short selling and the liquidation of many long positions.
The funding rates have now turned negative, reflecting an overall bearish sentiment and the dominance of short sellers. However, this could also be seen as a positive sign, as it suggests the futures market is no longer overheated. This scenario could create conditions for a more sustainable bullish trend in the coming months, provided there are no drastic changes.
