Bitcoin Bounces Back Before It Hits 2017 Peak, Is It Bottom In?
The price of bitcoin had fallen dangerously close to the 2017 cycle peak on Wednesday. It was a brutal drop for investors who saw their BTC portfolios lose after losses. Speculation ran rampant in the space about what a touch of less than $20,000 would have meant for the market. The implications were plentiful in their impact, but the recovery above $21,000 has stabbed the bears, if only for a short time.
Is Bitcoin Bottom In?
After Wednesday’s market recovery, it appeared that the market crash had been intervened. With bitcoin at the $20,000 level, many had resigned themselves to the fate that there would be no reprieve until the highs of 2017 were broken. Had this happened, it would have been a unique event in bitcoin history, with the digital asset always managing to never trade below previous cycle peaks.
Related literature | Bitcoin Crash Sends Institutional Investors to the Hills
As such, significant support building above $20,000 has restored some hope in the market that it would bottom. So far, this theory has managed to hold up as bitcoin has turned green again for the first time since the crash started.
More important, however, is the fact that the recovery has by no means been significant. The digital asset still remains well below the 20-day moving average, a sign that bears could easily regain a foothold.
BTC Drop Causes Fear to Reach Previous Cycle Peak | Source: BTCUSD on TradingView.com
However, bitcoin is said to be at oversold levels. So the market expects to see fatigue in the sell-off that has rocked the digital asset. A slowdown would certainly be good for bitcoin, but it would need to see more recovery to ensure this.
Consequences of Falling Under $20,000
The $20,000 level is important for bitcoin for a number of reasons. Among the most important of these are MicroStrategy’s bitcoin-backed loans. The way these loans are structured leaves an opportunity for margin calls if BTC falls below its previous peak cycle. And while CEO Michael Saylor has assured the market that the company has more collateral for its loan to avoid a margin call disaster, it remains a very real possibility.
Related literature | Double-digit losses are the order of the day as Bitcoin dips to $20,000
Another implication is Celsius liquidity levels. Now the former is said to have paid off some of its loans, pushing the liquidation price down to $14,000, but a break below $20,000 shows no significant support and would quickly liquidate the loan protocol.
Last but not least, the fact that bitcoin at $20,000 represents an important technical and psychological level. Since the majority of open interest denominated in BTC is all at the $20,000 level, a breach below that would lead to another selloff from investors.
The only major support after this level is $16,000 before falling to $14,000, Celsius’s liquidation price. However, if bitcoin is able to recover above $25,000 by the end of the week, a test of the $29,000 resistance point would soon follow.
Featured image from Listverse, chart from TradingView.com
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