Bitcoin’s price suddenly dropped by over 5% in just three hours today.
Analysts generally attribute this volatility to an overheated derivatives market and the new weekly candle coming up.
Why some technical analysts expected this move
Some traders and technical analysts had expected the bitcoin pullback – mainly because of the range it has seen in recent days.
Bitcoin has consolidated between $38,800 and $41,000 over the past 72 hours. Considering that we are in the weekend and volume is low all around, the likelihood of BTC retreating and testing the low of the range was high anyway.
Crypto trader Scott Melker had expected bitcoin to „test the lows“ of the range, which it did. BTC dropped slightly lower than $38,800, which surprised many traders.
Some traders placed a bid in the $39,300 support area with a stop just below $38,800, but BTC pulled back more than most expected – resulting in many stops being triggered.
In the short term, traders remain generally cautious and uncertain about BTC’s price action. On January 11, Bitcoin sees a new weekly candle, which is usually accompanied by an increase in volatility.
Edward Morra, a crypto trader, believes that many stops have been cleared and there is liquidity at the „range high“. This means that BTC is likely to rise towards the range high at $41,000. Morra commented:
„Stops cleared, now we have some liquidity at the range high, but there is 1 bearish possibility I spotted.“
Where do we go from here?
There are two scenarios in the short term. First, Bitcoin could retest the high in the $41,100 area and pull back.
Second, Bitcoin (Go to Buy Bitcoins with Paypal Guide) could rebound to $41,100 and break out this time, as BTC historically tends to break out on the third retest.
But some traders have recognized the emergence of tweets from celebrities – and they had also provided clues in past bull cycles that Bitcoin could be about to peak.
A pseudonymous trader named „Loma“ believes it doesn’t necessarily show Bitcoin is bearish or bullish. But it could be used as a way to gauge market sentiment, he said. Loma commented:
„It’s not necessarily bullish or bearish in terms of technology. I don’t expect price tmrw to crash because Katy Perry has crypto nails or KSI tweeted about $ETH. I just like using it as a benchmark for where we are in the cycle. I’m sure it brings in a lot of new buyers and attention, but I always wonder: alright, if we get a damn ton of exposure from celebrities, institutions buying/having bought, traders are most likely there. It sounds like a lot of buyers who have already bought.“