A double prime formation preceded Bitcoin's plunge below $48,000 on Dec. 28 with some analysts suggesting it may dip to $44,000 before resuming its uptrend.
Here’s a look at what many market analysts are language regarding the reasons behind this latest correction and what to look out for as 2021 comes to a close.
A bearish RSI divergence prior to the reversal
Insight into the technical reasons for the year-end correction for BTC price was offered by options dealer and onymous Twitter user John Wick, who denote the following chart highlighting a bearish “fake out” as the price of Bitcoin began to reverse.
Wick explained:
“We formed a double top that was clearly defined by bearish RSI divergence. Notice how price action trends up, while RSI was trending down. We also had a bearish Alpha Thrust & Squeeze fakeout.”
Possible dip to $44,000
Bitcoin’s continued struggles at the 21-week exponential moving average (EMA) was highlighted within the following chart from analyst and pseudonymous Twitter user Rekt Capital. The weekly chart shows the difficulty BTC has had in breaking above the technical indicator.
According to Rekt Capital, the worth action for Bitcoin is similar to a situation that occurred back in could “whereby Bitcoin is experiencing a multi-week consolidation between the two bull market EMAs,” and the price might soon return the $44,000 level. He continued:
“Historically, BTC has performed downside wicks into the orange area during this red retest so there's scope for another revisit of orange.”
( Jordan Finneseth, Coinmarketcap, 2021)