After quite a good few weeks in the green, we’re starting to see a possible small retracement in the crypto market. In times like these, rather than focusing on altcoins, it’s best to look at what the father of all crypto is doing. So, today we provide an update on the Bitcoin chart, as this is also the ideal direction indicator for the rest of the general crypto market.
Over the last couple of weeks, Bitcoin found support, with a low of $32,922 (Binance Exchange), on January 24th, 2022. Price reversed from there, reaching a high at $45,777 on February 10th, 2022. This represents an impressive increase in price of just under 40% over the last three weeks. With such a bullish move, a small retracement in price can only be good for Bitcoin and the crypto market in general, as it helps to establish support and build up for the next leg higher.
If we look at the targets where the price could find support at, there are some clues that the BTC chart is showing us there could well be a retracement.
First, looking at the all-important Fibonacci Retracement Levels, we see that Bitcoin has support at the 0.382 level ($40,917), the 0.5 level ($39,403) and at the 0.618 level ($37,949). While a retracement can be seen as healthy, let’s hope the Bitcoin price doesn’t drop too low, wiping out the last two weeks of positive performance.
Another level to keep an eye on is where there’s a Chicago Mercantile Exchange (CME) gap from the weekend of 4th-7th February, 2022. We all know that crypto never sleeps, but the futures exchange needs to nap at the weekend. This break in trading results in what’s called a CME gap, and these gaps most often get filled (for an explanation of their significance, read our “Chart of the day” article from 25th, January 2022). The CME gap we need to keep an eye on right now is at $40,760-$41,395.
With a retracement in sight, it’s all about support, and we can also find some of that at the orange daily trend line which has acted as support several times over the last few weeks, and which should hold as support if the price were to drop to such a level.
As previously stated, it’s all about support, but at the moment it also seems to be all about gaps too. This time, it’s not a CME gap that we’re looking at but a “liquidity gap”. This can be simply described as a discrepancy in the supply or demand of an asset. Looking at the chart, you’ll notice that the daily candle for February 4th had a low of $37,058 and a high of $41,843. This daily candle spiked up very quickly, and the majority of that price action for the day has not been tested. Thus, there is a liquidity gap which needs to be filled, and in order to capture liquidity on that daily candle, the price would have to come down to around the $39,400 mark.
After a fortnight of positive price action, it seems that a pullback is imminent. Based on the valuable information above, from what the BTC chart is giving us, we now have got a good idea where the BTC price could find support in the next couple of days, in order for us to prepare for the next leg up.