Bitcoin has been consolidating in a narrow range and three technical factors suggest that the currency is vulnerable to a sharp correction
The price of Bitcoin (BTC) has been experiencing enormous volatility in recent days. However, it is now consolidating in a narrow range of $ 6,900 to $ 7,100, where three technical factors suggest that BTC is vulnerable to a sharp correction. In the past 36 hours, the BTC price has consolidated just below the $ 7,200 heavy resistance level.
Usually, a big price movement happens when Bitcoin is stuck in a tight range for an extended period.
At the moment, three indicators show that the price of Bitcoin is vulnerable to a big fall; the emergence of a fractal that resembles the top of 2019, deviation from the downward trend line; and the increase in the supply of Tether.
1 – Deviation from the downward trend line
Looking at the technical details, whenever the BTC price rejects a downward trend line it mostly indicates a further bearish test of the lower support levels.
At the beginning of the week, a crypto trader called Trader XO suggested that in the short term, the price of BTC could follow a downward trend line and test the opening of the month again.
In the end, the price passed the trend line, reaching $ 7,200 at Coinbase. Currently, the price of Bitcoin is trading around $ 7,100. However, if the BTC rejects the $ 7,000 resistance level and breaks down in the previous range, the whole move would become a deviation and could signal a strong bearish trend.
The $ 6,950 to $ 7,050 zone has become a major area of resistance for BTC in the past two weeks and has tried to break through nine times since March 20.
2 – Fractal reflects February 2020 peak at $ 10,500 in Bitcoin
Before the economic consequences of the coronavirus, the pandemic became a strong variable for the short-term trend in Bitcoin’s price. In February, BTC was showing signs of a local top located at $ 10,500.
With the price rejected at the critical resistance level of several years and in the days that followed, Bitcoin faced a strong downtrend to $ 7,700 and, in the end, dropped to as low as $ 3,650.
The current Bitcoin price trend is very similar to the whole fractal that sent the $ 10,500 to $ 3,000 coin, according to technical analyst Crypto Capo.
3 – Increased Tether supply
In the past two weeks, the supply of Tether (USDT) has increased considerably by more than $ 2 billion, exceeding $ 6.3 billion in market capitalization. The notable increase in Tether’s entry into exchanges could mean that demand for stablecoin is increasing rapidly with investors seeking a safety net.
In this context, a crypto investor named Light recently said:
“Exchange balances increase when the potential BTC supply available for purchase on the eschanges is falling.”
The rapid growth of Tether’s offer amid uncertainty in global markets and the crypto market may indicate that most investors are cautious and skeptical of Bitcoin’s v-shaped recovery since March 12.
Source: Atoz Markets