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Is Bitcoin prone to one other drop beneath $40K in a traditionally corrective March?

02/27/2021

Bitcoin is displaying indicators of weak spot as February attracts to an in depth.

Bitcoin (BTC) has seen a corrective week as the worth dropped from $58,000 to $44,000 in a matter of days. This dropdown triggered a panic response throughout the markets because the euphoria was instantly halted.

As an illustration, the Crypto Concern and Greed Index plunged to month-to-month lows of 56 after being above 90, or “excessive greed” for a complete month. 

Crypto Concern & Greed Index. Supply: Different.me

Nevertheless, such a panic response is unwarranted as a result of corrections seem steadily in a bull market as a “reset” earlier than continuation. That is natural and wholesome and provides a great alternative for merchants and traders to purchase the dip.

Rejection at $52,000 signifies additional weak spot

BTC/USDT 4-hour chart. Supply: TradingView

The 4-hour chart reveals an obvious downtrend for the reason that earlier excessive at $58,000. This excessive might be the highest for the approaching months, a interval that will see a extra extended correction.

Nevertheless, the worth motion since this prime at $58,000 signifies weak spot as each help degree flips into resistance, indicating additional weak spot.

The chart reveals these flips, the place the $55,000 degree was the primary one. After that, the worth of Bitcoin dropped considerably to the help zone round $45,000. This help zone held and resulted in a powerful bounce towards $52,000.

However, sadly for the bulls, this degree wasn’t damaged and as a substitute noticed a rejection, confirming additional weak spot throughout the market and extra draw back for BTC value. 

This now paints a transparent image of the important ranges to observe. Ideally, the help zone between $42,500-$44,000 has to carry for additional upward momentum. If it fails, additional weak spot will be anticipated towards the $37,500-$39,000 degree.

But when the $42,500-44,000 help zone holds, greater costs will be anticipated as soon as Bitcoin breaks above the resistance between $50,000 and $51,000.

The bullish construction remains to be intact

BTC/USD 1-day chart. Supply: TradingView 

Whereas the decrease timeframes point out weak spot for BTC/USD, the upper timeframes recommend a wholesome correction. The market building remains to be very bullish, because the chart above reveals.

The earlier prime was at $42,000, after which the brand new help was established at $30,000. This final prime was simply damaged as Bitcoin’s value accelerated to the $58,000 excessive. Therefore, a correction to even $37,000 might be categorised as wholesome and natural in this kind of bull market.

Merely put, so long as BTC holds above the $30,000 low of January 2021, the market will be categorised as bullish.

March is usually a corrective month

XBT/USD 1-week candle chart. Supply: Tradingview

Historical past reveals that March isn’t essentially the most bullish month for the cryptocurrency market. Lately, corrections have been seen in March. Particularly, corrections of 15%-60% occurred in 2015, 2016, 2017, 2018, and 2020.

The newest crash was brought on by the Covid-19 pandemic and might be categorised as a “black swan.” Nonetheless, corrections are likely to occur in March and this 12 months may additionally see one other pullback.

Due to this fact, corrections can final for a number of weeks and are steadily not accomplished in only one drop. Therefore, a correction towards the $35,000-$40,000 remains to be on the desk.

XBT/USD 1-week chart. Supply: TradingView

The first indicator to observe for that is the 21-Week MA. Usually, corrections have a tendency to maneuver towards this line as a key level for a possible reversal. Due to this fact, within the coming weeks, this 21-Week MA may present help within the correction.

At the moment, the 21-Week MA is round $28,000, although this could climb up within the coming weeks towards $33,000-35,000.

The views and opinions expressed listed here are solely these of the creator and don’t essentially mirror the views of Cointelegraph. Each funding and buying and selling transfer includes threat. You must conduct your individual analysis when making a call.