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Bitcoin Price Analysis: A Dip at $40,000, Another Chance for Better Positioning

After floating around $44,000, Bitcoin performed another drop in the charts, reaching $40,000. For sure, this price level had acted before as a resistance point that prevent the price to move in the bullish zone.
Bitcoin Price Analysis: A Dip at $40,000, Another Chance for Better Positioning, BTC chart image

Bitcoin / US Dollar: General Overview

After floating around $44,000, Bitcoin performed another drop in the charts, reaching $40,000. For sure, this price level had acted before as a resistance point that prevent the price to move in the bullish zone.

 

As we had described in previous articles, there is a scale for Bitcoin to conquer previous bullish levels. The first step lays at $44,000, the second step lays around $47,000 – $48,000 while the third one lays above $55,000. At this moment, the first step is getting challenged as the market is trying to get another boost.

 

The described pattern that we can observe in the chart below, is an inverse “Head and Shoulders” pattern, which usually leads to a fierce bullish trend with a breakout, towards higher price levels. The neckline around $40,000 will probably make more investors take long positions as they expect an uptrend move in the next few days.

 

The trades that could be performed in this case can be derived into aggressive and conservative. The aggressive approach would be a direct long position during the second shoulder (at this moment practically) when the market is still unstable and possibly, the uptrend will be caught with a higher margin. In the aggressive approach, there is always a possibility for further correction in the market.

 

The conservative approach would be a waiting stance until the breakout happened and is verified from the market situation. In this position, investors could lose a severe margin of the uptrend but they will be more sure about the overall situation in the market.

 

The reality is that the second “shoulder” in this pattern is much more volatile than before, showing that the Bitcoin market is experiencing more and more action from bulls and bears. This action could be transformed into more power for the next phase.

 

The moving averages have turned towards each other but they still remain into bullish positioning. If the positioning continues to exist in this way, we could possibly avoid multiple or fake signals in the meantime.

 

The trading volumes have been sustained into lower levels than in previous periods but we should expect a sharp rise in them if the inverse “head and shoulders” pattern is confirmed.

 

Bitcoin / US Dollar: General Overview
Bitcoin / US Dollar: General Overview in Bitcoin Price Analysis, image from Tradingview

Bitcoin Price Analysis: BTC / USD, Short Term Overview

In the short-term period, we can observe that sharp moves have defined the current situation in the market, marking the next positioning in the charts.

 

Even if the current correction lies below the previous support zone at $42,000, we can still include it in the second “shoulder”. This pattern has been formed now and the expectations for the next days will become more and more clear if there is a breakout move that will bring the next trend into life.

 

Bitcoin / US Dollar: Short Term View
Bitcoin / US Dollar: Short Term View, image from Tradingview

Bitcoin / US Dollar: Day Trading Overview

In the day-trading window of this Bitcoin Price Analysis, the volatility spectrum has been quite wide, so there were a lot of opportunities to find out. At this point, we would like to mention that the day trading is not caring much about the direction of the trend, rather than the existing and expected volatility that exists in the market.

 

If the market has enough volatility, it creates a lot of opportunities for day traders to exploit and get profit out of it. In this situation, we can observe that a simple moving averages cross can create enough space for returns during the day. In the last 7 days, 3 signals came up in the chart. All of these signals proved to be correct, indicating that a solid strategy can be formulated, taking into account the momentum between bull and bear actions.

 

The average return for its trade lays around 2.5 %, which is a profitable scenario, especially for day-trading operations. Compared with traditional stock trading, those returns are a heavenly situation, thus many traders have started to include cryptos, mostly Bitcoin into their portfolios.

 

Also, we should mention that the trading volumes have accompanied the downtrend to $40,000, showing that some investors believed that the market has done enough for now and liquidated their positions in the market.

 

Bitcoin / US Dollar: Day Trading View
Bitcoin / US Dollar: Day Trading View in Bitcoin Price Analysis, image from Tradingview

Bitcoin / US Dollar: Indicators

MACD index (Moving Average Convergence Divergence) moved for the first time since January 20 in the red field, indicating that the current momentum is non-existent and there is no power in the market that could reverse the existing situation. Based on that scenario, we can say that the market will remain on the same spot for some days, before starting to explore new directions in the charts.

 

The RSI index (Relative Strength Index) moved sharply from value = 65 to value = 45. This means that the bears could possibly return at any time soon. The index’s value also indicates that the market has more potential to drop further at this moment, rather than make an effort to rise in the next days.

 

Bitcoin / US Dollar: Indicators
Bitcoin / US Dollar: Indicators in Bitcoin Price Analysis, image from Tradingview

Bitcoin Price Analysis: Conclusions

After managing to climb in the first recovery step around $44,000, the Bitcoin market dropped down to $40,000, creating an inverse “head & shoulders” pattern. This pattern often leads to another bullish run, with a breakout move to be the header for that.

 

The expectations lay on the bullish side for now, as more and more investors that believed the Bitcoin run is over, have abandoned the market and waited for the next turn to get into.

 

The next days will be full of fights for the $40,000 zone to be held until there is more support to enter the market!

 

Read our previous Bitcoin Price Analysises here!

George Foroglou

George Foroglou

George Foroglou heard first time about Bitcoin in a Christmas dinner in December 2013. As Finance student, he published articles regarding Bitcoin adoption, blockchain applications and IoT monetization strategies. From 2017, he is an active trader in the Bitcoin and other altcoins market, using mostly Technical Analysis. He has worked for plenty web portals, giving insightful articles about technical and fundamental analysis.

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