Bitcoin Corrects Towards $22K, But How Low Can It Go? (Bitcoin Price Analysis)

The $19K demand zone has acted as a significant support level for Bitcoin’s price in recent weeks, resulting in a short-term rally against the 50-day moving average of around $22K.

Technical analysis

Of Shayan

The daily chart

During the recent rally, the price failed to break out of the 50-day moving average, which is the most critical resistance level in Bitcoin’s path towards the $30K price channel.

On the other hand, as the following chart shows, the price broke the long-term descending channel’s middle boundary, successfully formed a pullback to the broken trendline and started a rally. If Bitcoin breaks above its 50-day moving average (around $22.5K), a rally towards the 100-day moving average (currently at $28K) and the upper limit of the channel will be possible. Furthermore, the RSI indicator roughly suggests the relative equilibrium between the bulls and the bears, as it is around 50.

The 4-hour chart

After experiencing a prolonged bearish trend, the price has entered a medium-term consolidation stage and is forming a well-known continuation pattern called a “wedge”. However, the lower trendline and the major support level at $19,000 have recently supported the price, resulting in a rise towards the upper limit.

That said, the market failed to continue higher as the price rejected the wedge’s upper trendline and plunges into a correction. If Bitcoin succeeds in breaking the wedge to the upside, its next destination will be the significant resistance level of $30,000. In contrast, if the trendline rejects the price, another short-term shakeout to the $18K mark will be possible.

Given the lack of demand and the current bearish sentiment in the crypto market, another bearish cascade seems a likely scenario for cryptocurrency.

Analysis of the chain

Of Shayan

As mentioned in our previous analysis, miners have recently joined the capitulation phase and have spread their holdings a bit. On the other hand, mining Bitcoin is not as profitable because the price has fallen by about 74% from its all-time high.

Bitcoin’s difficulty follows miner behavior and hash rate recent movements and adjusts based on how many miners currently have their machines connected. Usually, when they are more active miners, the difficulty adjustment makes it harder for them to mine a block and ensure that block production stays relatively constant. Based on CryptoQuant data, the latest tweak has reduced the difficulty by 5.01 percent. Since July 3, 2021, this is the most significant negative drop in Bitcoin difficulty. In addition, it is the third negative in a row, making it the longest such streak in a little more than a year.

Bottom line: Historically, miners’ capitulation has led to the end of the bear market. Therefore, Bitcoin may soon reach its long-term bottom and begin a new uptrend towards higher price levels.