Time to Buy Dip in Bitcoin? Key levels to watch

• Cryptocurrency markets corrected sharply, with big falls in Bitcoin and Ethereum.
• Regulatory concerns, proposed tax burdens and fears of higher interest rates contributed to Bitcoin falling below $20,000.
• Technical analysis suggests Bitcoin could bounce back if it establishes a floor at $19,500 and sees daily bars above $20,000-$20,600.

Cryptocurrency markets have had a tough week, and Bitcoin has been the hardest hit. Cryptocurrencies are in their first sharp correction of 2023 after a peak in February, with daily losses in Bitcoin and Ethereum reaching nearly 10% before retreating slightly.

Cryptocurrency markets, especially Bitcoin, began to sell off after the release of the FOMC minutes. The Fed’s hawkish views would have remained limited under normal circumstances. But the Silvergate crisis worsened things, and panic selling ensued as Bitcoin tried to find support in the $23,000 region.

As March began, cryptocurrencies continued to be challenged on several fronts. Expectations for higher rate hikes rose after Powell’s speech on the Fed’s 6-month plan to the Senate Banking Committee this week. This led to a further decrease in risk appetite.

In the last 24 hours, certain events led to a significant drop in Bitcoin. The Biden administration proposed eliminating tax subsidies for cryptocurrency investors in its 2024 budget, contributing to Bitcoin’s biggest daily decline of the week.

Furthermore, the government is planning to gradually introduce up to 30% tax on cryptocurrency mining, which is a major concern for the markets. This tax will increase mining costs in the United States, one of the most important regions for cryptocurrency mining. This played a key role in the short-term sell-off in cryptocurrencies.

Regulatory concerns, a selloff in stocks, fears of higher interest rates and a proposed tax on electricity used in cryptocurrency mining have all contributed to Bitcoin’s recent drop below $20,000. Yesterday, the New York AG filed a lawsuit against the KuCoin exchange, alleging that it sold unregistered securities and provided services in the state without a license.

The move was the latest in a series of regulatory crackdowns on the cryptocurrency market in the United States. A key detail in the case was that Ethereum was mentioned as a security for the first time in a court case. In light of all these developments, cryptocurrencies, especially Bitcoin, have taken a big hit.

h2 Bitcoin: Technical View/t2

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Bitcoin easily broke through short-term support this week. Based on the short-term uptrend in February, it fell to the Fibonacci expansion area. Looking at last month’s price action from a different perspective, on February 24, Bitcoin broke the symmetrical triangle pattern formed in a high-volume downward move. This pattern suggests that BTC has completed its bearish momentum as of today, in line with the expected decline in the overall bullish momentum.

On the other hand, the fall in Bitcoin to Fib 1,618 could trigger reaction buying. Accordingly, if Bitcoin can establish a floor in the $19,500 area in weekend trading, traders will be closely watching daily bars above the $20,000 – $20,600 area for a possible pullback.

This move could mean that BTC has priced in recent events and a rally towards February’s $21,600 support zone is likely next week. On the other hand, if the selling continues, BTC could fall below $19,300 to $18,000 and then continue towards the December 2022 bottom zone of $16,500.

Dissemination: The author does not own any of the securities mentioned.

Written by:
Günay Caymaz/Investing.com