Why Bitcoin Price May Be Poised to Return to $20,000
Bitcoin price managed to close yesterday’s daily candle above critical support, giving bulls a fighting chance to prevent further downside. However, today’s trading session has favored the bears, with BTC moving below the $19,000 area.
At the time of writing, Bitcoin stands at $18,900, with a loss of 1% in 24 hours and a loss of 2.4% in one week. Other cryptocurrencies in the crypto top 10 by market capitalization follow a similar trend except for Cardano and Solana. These cryptocurrencies are registering heavy losses across the board.
Bitcoin price takes liquidity down
Last week, the Bitcoin price reacted negatively to the September Consumer Price Index (CPI) published by the US government. This calculation is one of the benchmarks for inflation, and the September print indicated higher levels.
For its part, the US central bank (Fed) will tighten monetary conditions in global markets. This policy will continue to limit any bullish momentum for Bitcoin and risk assets, including those in older markets.
This reaction to higher inflation, and a hawkish Fed, saw the Bitcoin price resume its annual lows near $17,600 when the September CPI print was published. The crash was short-lived as BTC returned to the high $19,000 area.
During the flash crash, many traders opened long positions while BTC recovered. These traders expected a higher move and their leverage positions left a lot of liquidity to the downside. According to analyst Justin Bennett, Bitcoin price takes that liquidity before resuming its bullish momentum.
Bennett pointed out that BTC is moving in a tight range between $18,600 and around $19,800. The cryptocurrency may return to these levels before attempting another breach of critical resistance near the $20,000 area. The analyst so the following while sharing the diagram below:
This has been my plan for $BTC all week. It was a combination of last Thursday’s long lower wick being partially filled + the mid-$18k liquidity gap + channel support.
Bitcoin is showing signs of capitulation
At the time of writing, the Bitcoin price seems to be following this path. The cryptocurrency is back in its range and can aim for the top of the channel.
On higher time frames, Bennett said that while $18,700 is holding on the daily chart, Bitcoin may be gathering momentum to push into the central area of the $20,000 region before making another leg lower.
Data from research firm Santiment indicates that Bitcoin is showing signs of capitulation. Many believe that in recent months, BTC holders have capitulated en masse, making this long period of consolidation a painful step in gearing up for the next move to the upside.
👋 Signs of surrender have appeared on Friday, including transactions from addresses that are exchanging their assets while running at a loss. #Bitcoin sees the lowest ratio of losses vs. profit transactions in 4.5 months, and #Ethereum seeing historically low levels. pic.twitter.com/tsJcgqWyBh
— Santiment (@santimentfeed) 21 October 2022
