Bitcoin Weekly Forecast: What’s next for BTC after $65 million worth liquidations?

• Bitcoin price seems to be holding up its bullish narrative despite the recent 6.5% sell-off.
• The sudden downswing pushed $65 million worth of both long and short positions to be liquidated.
• The bullish outlook could face extinction if BTC flips the $21,626 support level into a resistance barrier.

Bitcoin (BTC) price edges closer to the lower limit of its bullish structure after Thursday’s market sell-off. This move has also caused many altcoin traders to be caught off guard leading to $65 million in liquidations. Regardless, this is a time for investors to exercise caution as BTC scrambles to find its footing.

Also read: Bitcoin long liquidations hit highest level since August

Bitcoin price plays the silent game

Bitcoin price has set up five higher highs and two higher lows in its pursuit of tagging and overcoming the $25,000 psychological level. Connecting trend lines across these swing points reveals an ascending parallel channel.

Thursday’s descent caused Bitcoin price to slice through the 200 four-hour Simple and Exponential Moving Averages (SMA, EMA) and is currently bouncing off the Momentum Reversal Indicator’s (MRI) breakout line at $22,258. 

This breakout line is key in determining the next move for Bitcoin price. 

From a technical point of view, a breakdown of the $21,265 support level will create a lower low. Such a development will not only trigger an influx of selling pressure from sidelined investors but it will also invalidate the bullish outlook. 

The combined selling pressure will most likely shatter through the 200-day EMA at $21,175 and tag the 200-day SMA at $19,724. 

BTC/USDT 1-day chart

An interesting detail about the aforementioned levels is that they coincide with the gaps formed in the Bitcoin price action seen in the Chicago Mercantile Exchange (CME). CME only allows BTC trading on weekdays, so the chart has gaps over the weekends. Chart experts have found that gaps are almost always eventually filled. This suggests an increased chance BTC price will fall down to the level of the CME gap and fill it.

If Bitcoin price were to break its ongoing bullish structure and flip the $21,625 support level into a resistance barrier, the next significant zone would be the immediate CME gap, extending from $19,995 to $20.460, coinciding with the 200-day SMA.

BTC 1-day CME chart

A break in correlation with the stock market? 

To a certain degree the Bitcoin price is correlated with the stock market as both are impacted by the cost of money and the value of the US Dollar, both of which are linked to policies enacted by the Federal Reserve. 

When there is a disconnect between stock prices and BTC as happened during BTC’s recent sell-off, therefore, it is the exception to the rule. 

The chart attached below shows that BTC’s recent decline was an isolated event. BTC and ETH turned down sharply while the S&P 500 saw an uptick. Gold price, meanwhile, remained unaffected. 

It is too early to determine if this disconnect is short-term or if it will persist over the longer term. 

BTC vs. ETH vs. Gold vs. S&P500 chart

Traders should probably adopt a “look before you leap” philosophy in regards to the current decline in BTC price, rather than simply jumping on the bandwagon. 

After a sudden move like this, the market needs time to consolidate before it reveals its next hand. Until then investors should remain cautious. 

If the $21,625 support level or the bullish structure sustains, and sidelined buyers come to Bitcoin’s rescue, investors can expect BTC price to attempt a recovery. In such a case, the $23,747 will be a tough level to overcome. 

Successfully doing so would open the path to collect the buy-side liquidity resting above the equal highs formed at $25,211. A flip of this level on a weekly timeframe will invalidate the bearish outlook and potentially trigger a run-up to the $30,000 psychological level.

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