Was $50k a Local Top? (Bitcoin Price Analysis)
Bitcoin managed to daily close back above $48.1k, but met with selling pressure throughout the day, hitting an intraday low of $46.3k, according to Bitstamp.
Short-term technicals have turned cautiously bearish, especially with bearish divergence forming on the daily chart and Bitcoin failing to stay above $50k.
The primary cryptocurrency remains in a tight spot as the price successfully reclaimed the 21-week and 200-day moving average recently, but is still in the validation phase for bull market continuation. It is critical for BTC to hold support at the 200-day moving average – currently at $46k, otherwise, near-term downside risk will increase.
BTC has fallen deeply into the green zone between $48.1k to $46k, a near-term zone that is critical for the larger structure, and especially for a bull market continuation. Earlier today, multiple rounds of long liquidations occurred, wiping out over 2,300 BTC worth of longs. A large cluster of BTC longs was positioned around $46.9k, making it a target ripe for liquidations.
Large clusters of Bitcoin shorts are currently positioned around $49.5k and higher, making this level crucial to watch. Especially now – that BTC longs have been liquidated at current prices.
What can be Expected if Bitcoin Drops Below $46k?
If BTC struggles to hold the 200-day moving average at $46k, we can expect downside risk to $44k to $42k, which are highly confluent areas of support.
This would be a less ideal scenario for the bulls as the 200-day moving average is one of the most important technical levels to protect. In case of an unexpected liquidation event – watch $43.9k to $44k closely, as these levels marked the previous higher lows. Closing below these levels will weaken technicals and significantly increase the risk to the downside.
The UTXO Realized Price Distribution metric has a moderate amount of supply building in the mid 40k area, so this can act as support in case we continue to see near-term weakness in price.
Breaking below the mid 40k area will likely send BTC towards the lower 40s near the top of the multi-month trading range at $40k to $41.3k.
Going forward, we can expect wild swings up and down heading into Friday as the market prepares for the monthly options expiry. With longs recently liquidated at $46.9k and a large cluster of shorts positioned at $49.5k and higher, market participants should prepare for potential volatility.
Critical Monthly Close for Long-term Investors
Long-term investors should also pay attention to the upcoming monthly close, especially after BTC rallied over 72% from the lows at $29.2k. The August monthly close will mark a potential second monthly close higher, giving higher time frame technicals a push higher.
Even with near-term volatility to the downside, the mid to long-term outlook remains bullish for BTC. As long as fundamentals continue to strengthen, on-chain metrics do not show massive exit liquidity, long-term technicals trend higher, and momentum on the daily, 3 days, and weekly chart hold, BTC is expected to perform well in Q4 2021. The bulls and bears will be watching $46k very closely as this is the key level that determines BTC’s direction.
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Cryptocurrency charts by TradingView.