Is The Current Decline In Bitcoin Prices Towards $40K A Bear Trap?

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Bitcoin
Bitcoin

The sudden drop in bitcoin price from $44,000 suggests that purchasing the dip may be a good idea if leveraged long positions are cleared. On December 11, a substantial 7% decline in the price of BTC occurred as several indicators showed sell signals and investors booked gains. It will be determined by Bitcoin’s ability to hold above $42,000 whether this drop is a sign of a wider market reversal or a buy-the-dip opportunity. 

Temporal Fluctuations Or Significant Trend Reversal For Bitcoin?

The abrupt 6.5% downturn and the market’s extensive liquidations of nearly $300 million coincided with the steep decline in BTC prices on the daily chartZooming into the larger 1-day candle period, though, this action seems to be a slight retreat from a larger bullish trend that has been formed over the previous few months. Additionally, below 70, the relative strength index (RSI) has declined into a neutral zone. The study from last week supported the robust advance that Bitcoin has been experiencing, with notable momentum following the price’s crossing of the $40,000 threshold.

Given this background, it is more likely that the recent decline was a transient oscillation inside an ongoing upward trend rather than a broad trend reversal, but more negative or sideways movement is not completely ruled out for the next few days. 

As previously said, key levels to keep an eye on are $31,860, $28,050, and $25,200, which have all been noteworthy since 2021. Consequently, the argument that the present price action is within the parameters of a healthy correction rather than a negative trend reversal is supported by the fact that the price of bitcoin has not approached these levels and that the recent uptrend has been strong enough to easily exceed minor resistance levels.