Source: PaxForex Premium Analytics Portal, Fundamental Insight
Bitcoin, with Ethereum and Dogecoin, continue to correct as capital flees to cryptocurrencies with fewer problems and greater upside potential. Since early November, Bitcoin has lost over $17,000, and it entered a bear market as of two weeks ago. The definition of a bear market is a retreat of 20%+ from its peak. Bitcoin dropped nearly 27% over the past seven weeks. The 40,000 psychological support level may act as a magnet and attract price action amid institutional portfolio adjustments in 2022.
Market sentiment remains bearish after Bitcoin slid below 50,000, and at the end of today’s trading session, $6 billion of options contracts will expire. It is one of the largest expirations of 2021, and traders should brace for volatility which is likely to extend the current downtrend of cryptocurrencies in a bear market. More fund managers opt for growth potential elsewhere, and a sell-off in global equity markets amid rising inflationary pressures could accelerate the downtrend.
Adding to worries for Bitcoin are transaction costs, processing speeds, and scalability issues. While updates try to fix the problems, and Bitcoin miners work to decrease the carbon footprint, other projects come free of those problems and present tremendous upside amid real-world applications rather than a pipeline of what could happen. While Bitcoin may experience a price spike to start 2022, the medium-trend remains bearish, and traders should not rule out a breakdown below 40,000 and an extension of the current bear market.
The forecast for the BTC/USD remains bearish after price action plunged below its descending Ichimoku Kinko Hyo Cloud. It is likely to add to selling pressure throughout January. Volatility may increase after a period of sideways trading, as the Kijun-sen remains flat and the Tenkan-sen drifts moderately higher. Price action may challenge its present resistance with a price spike, as the CCI bounced off the -100 level. A breakdown will offer traders a selling opportunity. Can bears add to their recent gains and force the BTC/USD into its horizontal support area? Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month.
Should price action for the BTC/USD remain inside the or breakdown below the 45,920 to 48,960 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 46,800
- Take Profit Zone: 32,345 – 35,415
- Stop Loss Level: 52,110
Should price action for the BTC/USD breakout above 48,960, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 52,110
- Take Profit Zone: 57,215 – 58,000
- Stop Loss Level: 11,385
Open your PaxForex Trading Account now and add this currency pair to your forex portfolio.
