14 June 2021: Since the May 19 correction, Bitcoin has since been in a consolidation phase. Market sentiment still remains fearful, seen both through reactions via social media and from the fear & greed index for cryptocurrencies. This article will examine the outlook for Bitcoin through the rest of summer 2021 and provide a risk assessment on current market action.
Overview of Current Bitcoin Price Action
Below in Figure 1, the all time high is circled at the top in red, and the current price of Bitcoin is circled at the bottom in blue. Bitcoin peaked on the 14th of April at just under $65,000 USD per coin. Since that all time high, Bitcoin rejected off the top of that trendline and fell below to the $49,000 USD level before eventually correction back to $30,000 USD at the bottom.
Figure 1
The trendlines drawn above on Bitcoin have been accurate back to November of 2020, showing the upward price channel movement of Bitcoin. Since the correction, Bitcoin has been testing support at the bottom trendline highlighted in Figure 2 while trading relatively flat despite market volatility.
Figure 2
Analyzing a Potential Long Position from Current Levels
If the breakout over the current price channel does in fact hold, Bitcoin will have upside to possibly trend as high as the top of the next price channel at around $45,000 USD. This would equate to a possible short term gain of around 15% from the current prices. Bitcoin has been trading relatively flat towards the top of this price channel it fell into after the May correction, with multiple tests of the bottom of the price channel visible in the blue circles above in Figure 2. This is an indication that Bitcoin is attracting buyers at these levels despite a fearful market sentiment.
Figure 3
Analyzing a Potential Short Position from Current Levels
Should the current upward movement turn out to be a false breakout, Bitcoin could trace back toward support at around $35,000 USD or make for a larger low down to the bottom of the major price channel at approximately $31,000 USD. These scenarios would equate to a -10% and -20% gain for Bitcoin, respectfully.
Figure 4
Bitcoin Set Up for Potentially Large Move
Despite market sentiment being very bearish, the probability of Bitcoin going below $30,000 USD is unlikely. As stated above, Bitcoin has shown it has strong support at the bottom of the price channel at around $31,000 USD, signaling that investors are buying Bitcoin there. Bitcoin could go as low as $28,200 should the above price channel breakdown in a bearish movement, but a drop down to $20,000, as some market sentiment has been suggesting, is not likely. A break below $28,200 would break the long term upward price channel that Bitcoin has been in since mid to late 2020, signaling that the market has entered a bear trend. However, it is the opinion of REKTimes Analysis that this scenario is of low probability.
The upside on Bitcoin, in the opinion of REKTimes, far outweighs the downside from this current price level. With an increase in bullish news such as the El Salvador Bitcoin adoption announcement, there are many external factors also supporting the technical picture of current Bitcoin fundamentals. These levels, from $31,000 USD up to current prices, is a buying opportunity for the next leg up of the bull market.
Figure 5
The current setup of Bitcoin is fundamentally similar to the January 2021 correction and consolidation. Bitcoin trended down from the then all time high at around $41,000 USD down to $28,000 USD at the end of January. This resulted in a -30% correction on Bitcoin over the course of the month. Towards the end of this downtrend, Bitcoin began to consolidate at the bottom of the price channel and then soared up to a new all time high at the time of $57,300 USD, a 47% gain over the course of approximately 3 weeks.
Bitcoin, at the lows of the May correction, were around 53% down from all time highs at just under $65,000 USD. From current levels, Bitcoin is still down around 40%. After this period of consolidation, a similar move on Bitcoin would send Bitcoin to new all time highs at the top of the overall price channel, at around $70,000 USD, a potential gain of 79% on Bitcoin.
Closing Comments from REKTimes
Bitcoin, based on the current market fundamentals, could be a great buying opportunity for investors to make a sizable return. Is it possible that Bitcoin breaks for new lows below $30,000 USD? Absolutely. Is it the most likely scenario, given all the information we have? Absolutely not. It is imperative to consider all the data points, fundamentals, and technical data collectively. It is the opinion of REKTimes that the bottom from the May correction is already in at $30,000 USD, and a move further down below that level is a low probability.
Always remember, it is important that you conduct your own due diligence and analyze your own chart before officially coming to any conclusions or making any investment decisions. We at REKTimes hopes that this article assists you on your own assessment of the Bitcoin market. Good luck on your trading!
REKTimes is a rebrand of the previous blog, Crypto.Think
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