Bitcoin, the leading cryptocurrency, has recently experienced a pullback of more than -11% after reaching a new all-time high of $108,374 on December 17. In a new video, crypto analyst Rekt Capital explores the potential worst-case scenarios for Bitcoin in the current market conditions. He draws upon historical data from past cycles in 2013, 2016–2017, and 2021 to highlight the significance of weeks 6, 7, and 8 in the price discovery uptrend. During these weeks, Bitcoin has historically exhibited a tendency to correct, with some dips reaching as steep as 34% or higher.
The current price action of Bitcoin has brought its value to a critical support zone at $96,537 on the weekly chart. Rekt Capital stresses the importance of this support level, as it has previously enabled Bitcoin’s price surge to $108,000. However, failing to maintain this support could lead to a more severe correction down to $89,830. In analyzing the recent price movements, Rekt Capital also notes the emergence of a bearish engulfing candle in the weekly timeframe, signaling a potential reversal and transition into a corrective period.
Moreover, Rekt Capital highlights the significance of maintaining the 5-week technical line and the orange trend line. Losing these key levels could provide evidence of a potential transition into a corrective period for Bitcoin. He also addresses the CME gap between the $78,000 and $80,000 price levels, noting that dips of 26%, 27%, or 28% could potentially fill the entire gap. While CME gaps historically tend to get filled, there are a few exceptions that have never been filled, adding to the uncertainty of Bitcoin’s future price movements.
Despite the cautionary signals, Rekt Capital maintains a bullish stance in the long term, emphasizing that pullbacks are essential for future uptrends in the parabolic phase of the cycle. He points out that corrections have historically provided the necessary breathing room for the market to continue its upward momentum. In the 2021 cycle, for example, Bitcoin experienced pullbacks of 16% and 8% in weeks 6 and 8 respectively, yet the overall trend remained positive. The current 10% retracement, while significant, could potentially set the stage for the next leg of price discovery in the market.
In conclusion, while Bitcoin faces potential downside risks and uncertainties in the short term, the long-term outlook remains positive according to Rekt Capital’s analysis. Keeping a watchful eye on critical support levels, technical indicators, and historical patterns can provide valuable insights into Bitcoin’s price movements in the current market environment. Despite the recent pullback, Bitcoin’s resilience and ability to bounce back from corrections suggest that the cryptocurrency market may still have room for growth and further price discovery in the coming weeks and months. At the time of writing, Bitcoin is trading at $95,000, with its future trajectory remaining uncertain yet optimistic.
