Earlier today, on May 29, the bitcoin price dropped to $7,040, to its new monthly low. Since then, BTC has recovered to $7,450, but regardless of the newly formed optimism in the market, it is still too early to conclude the start of a new bull market.
As CCN.com reported throughout late May, analysts expect the bitcoin price to fall below the $7,000 mark in the near future before rebounding to its mid-term support levels at $10,000 and $12,000. On May 29, BTC came close to reaching below the $7,000 mark as it dropped to $7,040.
Over the past few hours, BTC rebounded relatively quickly from $7,050 to $7,450, but its short-term corrective rally is not convincing enough based on its volume and price trend to conclude that a new bull rally is forming.
One respected bitcoin technical analyst wrote:
“Recent price action has taught us that these thin, fast moves up should be treated with some caution. They’re known as liquidity voids and price often, though not always, comes back to fill them in. If price can find support above $7,450 that would suggest a break in market structure & these would be the next logical areas to reach for (shorter-term). If it can’t/fails to close on a higher high, would suggest this thin move was just a stop run of the blue swing high.”
The technical analysis of the short-term trend of bitcoin is backed by the shortage of volume over the past 24 hours. The abrupt spike in buy volume which caused BTC to jump by more than $4000 was smaller than the sell volume recorded merely two days ago, demonstrating that the recent price surge of BTC is temporary.
The downward trend of bitcoin throughout May has been strong, and it will require a significant bounce from a proper support level for BTC to eye previous levels at $10,000 and $12,000. Investors like Willy Woo see the next major support level at $5,700, while many traders expect BTC to rebound from the lower end of the $6,000 region.
As of current, the volume of BTC, which remains just over $5 billion, is not sufficient to initiate a short to mid-term recovery. The trading volume of Tether, a cryptocurrency whose value is hedged to that of the US dollar, is often a good indicator of the short-term state of the market as cryptocurrency traders regularly utilise USDT to hedge the value of cryptocurrencies to the US dollar.
USDT’s volume is currently larger than Ethereum and EOS at $2.8 billion and has crossed 50 percent of the volume of BTC, signifying that traders are not confident in the short-term trend of the cryptocurrency market.
Despite the strong performance of bitcoin on May 29, it is likely that the cryptocurrency market will continue to fall until major cryptocurrencies find a strong support level and bottom to bounce off of. For bitcoin, its short-term bottom will likely be the lower end of $6,000, at least in the short-term.
Featured image from Shutterstock.
Last modified: March 4, 2021 5:08 PM