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Bitcoin (BTC), the world’s largest cryptocurrency, is facing a potential correction as it loses support at a critical level and trades at $27,300. Technical analysis shows that the Parabolic SAR has turned bearish on the daily chart, indicating a possible decline in the near future. The price of bitcoin also fell below the 50x exponential moving average (EMA), a critical support level.
Parabolic SAR is a popular technical indicator for identifying possible trend reversals in the market. When the indicator turns bearish, it suggests that the price of an asset may be declining. In this case, a bearish signal on the Bitcoin daily chart could mean that the cryptocurrency is about to correct.
Prepare for a Bitcoin Correction as Support Levels Fluctuate
According to trader and technical analyst Ali, if Bitcoin fails to hold above the 50EMA level, it could confirm a possible correction to $26,200 or even $25,000. Also, Bitcoin’s inability to hold the 50EMA as support is another warning sign for traders.
The 50EMA is a well-known moving average that shows the average price of an asset over the past 50 days. When the price of an asset falls below this level, it can be seen as a bearish signal indicating that the asset may move lower.
Bitcoin is currently down over 4% in the past 24 hours, trading below the 50EMA; this could confirm a possible correction to $26,200 or even $25,000, according to the analyst. These levels represent significant support areas for Bitcoin; the cryptocurrency could see further declines if they do not hold.
In addition, according to Ali, the Bitcoin network is showing signs of contraction, declining popularity among users, and a series of lower highs and lower lows. This downward trend in wallet activity could signal that the price of bitcoin is about to fall.
As BTC adoption declines, the demand for cryptocurrency also declines. This ultimately puts downward pressure on the price of BTC as fewer people are interested in buying and holding cryptocurrency. The trend towards lower highs and lower lows seen on the Bitcoin network suggests that the price of the cryptocurrency may be heading for a correction.
Added to this is bad news for bitcoin bulls; according to Santiment, the largest bitcoin whale address owned by Binance has been very active in the market, moving $2.26 billion worth of bitcoin in just four transactions. This sudden move caused the supply of Bitcoin on exchanges to drop from 6.78% to 5.84%, indicating that the whale may move Bitcoin to a cold storage or storage solution.
BTC above $25,500 signals a long-term bullish trend
Despite recent market fluctuations, BTC is still showing a strong uptrend, according to The Birb Nest weekly BTCUSD chart analysis, a cryptocurrency and investment platform. In addition, BTC is trading above the 200-week uptrend and the flattening 50-week trend, which is a positive indicator.
Birb Nest indicated that the uptrend is likely to continue if Bitcoin remains above the $25,500 level. However, cryptocurrency analysis firms are holding back a potential visit to the $25,000 level. This level is seen as a key support level for Bitcoin and a sustained hold above it could signal a bullish outlook for the cryptocurrency.
Moreover, The Birb Nest notes that the link between Bitcoin and S&P 500 prices has weakened in recent weeks. This is reflected in the 7-week correlation coefficient which is 0.39.
Correlation of BTC and SP500. Source: The Birb Nest on Twitter.
Although the correlation between Bitcoin and the S&P 500 has weakened, it remains positive. This suggests that both assets still share some similarities in terms of price movements. So if there are gains or losses in large-cap stocks, Bitcoin is likely to be somewhat affected.
BTC downtrend on 1-day chart. Source: BTCUSDT on TradingView.com.
Featured image from Unsplash, chart from TradingView.com
