Source: PaxForex Premium Analytics Portal, Fundamental Insight

Bitcoin dropped to lows not seen since March 1st, 2021. Many traders may want to rush and buy the dip, but they should remain cautious, as more short-term downside is likely. The US Justice Department and the US Internal Revenue Service announced probes into US citizens involved with Chinese-based cryptocurrency powerhouse Binance. Elon Musk also had a change of heart and announced Tesla would no longer accept Bitcoin as a payment method. It comes only weeks after he announced Bitcoin as an option. Musk stated high fossil fuel energy usage, but it existed from the beginning of Bitcoin.

As the Bitcoin community remains upset and disappointed, and the energy usage debate heats up, more capital is likely to escape Bitcoin and push the BTC/USD lower. A sell-off in the cryptocurrency market is overdue, and what Musk is doing via Twitter is a classic pump-and-dump scheme. It shows that excessive speculation in Bitcoin and the current correction may gather downside momentum if more negative developments pile on, forming a chain of bearish events. The sharp rally in Bitcoin is vulnerable to an equally massive sell-off.

The forecast for the BTC/USD remains bearish after price action broke below 50K, rallied above it to a lower high, and plunged below it once again. The sell-off in other financial markets adds to downside pressures. After the Ichimoku Kinko Hyo Cloud flatlined, it took a bearish bias. The Kijun-sen and the Tenkan-sen turned sideways and are expected to turn lower. After the CCI plunged into extreme oversold territory, traders should wait for a breakout before selling the rallies in this cryptocurrency pair over the short-to-medium term. Will bears 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 47,420 to 50,345 zone, PaxForex recommends the following trade set-up:

• Timeframe: D1           
• Recommendation: Short Position
• Entry Level: Short Position @ 49,130
• Take Profit Zone: 28,745 – 32,400
• Stop Loss Level: 52,740

Should price action for the BTC/USD breakout above 50,345, PaxForex recommends the following trade set-up:

• Timeframe: D1           
• Recommendation: Long Position
• Entry Level: Long Position @ 52,740
• Take Profit Zone: 59,515 – 60,630
• Stop Loss Level: 50,345

Open your PaxForex Trading Account now and add this currency pair to your forex portfolio.