Introduction
The Bitcoin (BTC) price has taken a hit in the last four days, dropping by more than 11% after reaching all-time highs above $108,360 on December 17. This decline has raised questions about whether this level is the local top for BTC and how low the price can go over the next few days.
Consolidation Patterns: A Key to Understanding Bitcoin’s Price Action
To better understand the current situation, let’s take a look at historical patterns that may be relevant to the current market trend. Between December 2023 and January 2024, the BTC/USD trading pair exhibited a rounded accumulation pattern, consolidating within a rectangular range ($39,000–$46,000). This was followed by a brief correction before Bitcoin broke out of the range and rallied sharply to $66,000 by March 2024.
The current pattern demonstrates similar price action, with Bitcoin consolidating between $88,000 and $102,000 as of December 20. It’s possible that the price is undergoing a correction toward the channel’s lower boundary zone defined by the $88,000–$90,000 range.
Possible Scenarios for Bitcoin’s Price Action
There are several possible scenarios to consider:
- Correction Toward the Channel’s Lower Boundary: If history repeats itself, Bitcoin may initially dip toward $88,000 in December, only to rebound toward the $102,000 resistance and beyond thereafter.
- Breakout Above Resistance: A confirmed breakout from the ascending triangle support near $97,000 could set the stage for a breakout above $102,000, with an upside target near $114,650.
Relative Strength Index (RSI) Divergence: A Warning Sign?
The relative strength index (RSI) is forming lower highs despite BTC/USD reaching higher highs, signaling weakening bullish momentum and a potential price correction ahead. This divergence is reminiscent of the 2021 market top, which preceded a significant drop from Bitcoin’s then-all-time high near $69,000.
Support Levels to Watch
On longer time frames, the key support to watch lies at the 50-week EMA (Exponential Moving Average), which will be around $66,600 by January 2025. If that fails to hold, the next support is at $57,000, which is the 0.786 Fibonacci retracement level.
Conclusion
The current situation with Bitcoin’s price action is complex and open to multiple interpretations. While some signs point to a potential correction or even a deeper drop, others suggest that the price may already be bottoming out. As always, every investment and trading move involves risk, and readers should conduct their own research when making a decision.
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