Bitcoin (Bitcoin) May be far below the analyst’s target forecast of $100,000 by the end of 2021. Kraken CEO Jesse Powell (Jesse Powell) also predicted that Bitcoin’s target price is $100,000, which is still bullish in the long term, but he does not rule out A sharp drop in the short term.
One of the negative factors that may increase pressure on Bitcoin in the short term is the change in the Fed’s monetary policy. On December 15, the Federal Reserve announced that it would End its bond purchase plan At an even faster rate, and is expected to raise interest rates three times in 2022.
According to Sam Stovall, Chief Investment Strategist, CFRA Research NBC Finance Channel Historically, when the Fed raised interest rates three or more times, the S&P 500 index tended to show negative returns within 12 months.
If history repeats itself, Bitcoin may also find it difficult to escape due to its strong correlation with the S&P 500 at various stages in 2021. It is difficult to predict with certainty whether investors will continue to buy Bitcoin to hedge their portfolios in response to rising inflation risks. Closing sentiment will lead to profit bookings.
With this uncertainty, let’s turn to the chart and conduct a long-term Bitcoin analysis to determine the key levels that need attention.
Bitcoin’s sharp rise in 2017 pushed the Relative Strength Index (RSI) above 96, indicating that traders are in a state of excitement. Vertical rebounds are rarely sustainable, and are usually accompanied by sharp adjustments or a period of consolidation. This is what happened after the 2017 bull market ended.
The BTC/USD currency pair stayed below the December 2017 high until it broke above 20,000 USD in December 2020. This shows a major infrastructure construction period of approximately three years.
The sharp rise of the currency pair in 2021 pushed the RSI above 91 in March, and then took a profit. However, unlike 2017, the bulls are actively defending the 20-month exponential moving average ($37,281).
This shows that market sentiment is still positive and traders are taking advantage of dips to increase their holdings. The subsequent rebound pushed the currency pair to a record high of $69,000, but the bulls were unable to maintain a higher level. This shows that traders are making profits on rallies.
The sharp correction once again pulled the price towards the 20-month exponential moving average (EMA), and the RSI showed signs of negative divergence, indicating that the bullish momentum may be weakening.
If the bears fall and the price stays below the 20-month moving average, the currency pair may fall to a key support level of $28,800. This is an important level for the bulls to defend, as falling below this level may lead to long-term infrastructure construction.
On the other hand, if the price rises from the current level, the currency pair may retest $69,000. A break and close above this resistance level may indicate the resumption of the uptrend.
The bulls have twice pushed the price above $64,899, but they were unable to maintain a high level. This may trap aggressive bulls who buy breakouts and lead to long-term liquidation.
The 20-week moving average ($52,016) began to gradually fall, and the RSI fell to the negative zone, indicating that the bears are trying to make a comeback. The bulls tried to defend the 50-week simple moving average (SMA) ($47,709), but were unable to push the price above the 20-week SMA.
This may attract further selling, and the bears are now trying to drive the price down to the next strong support level of $39,600. This is an important level of bullish defense, because if it breaks, the currency pair may plummet to $28,732.
Such a move may delay the start of the next round of uptrend and keep the currency pair in the range between 28,732 down and up 69,000 USD.
Conversely, if the price recovers from the current level and breaks the 20-week moving average, the bulls will try again to clear the upper resistance zone of $64,899-69,000.
If they succeed, the bullish momentum may pick up, and the currency pair may start heading north towards the price zone of $100,000 to $109,000, where the rebound may face strong resistance.
Or, a break and close below 28,732 USD may lead to a bear market, with the next strong support at 20,000 USD.
In the past week, the currency pair has been falling in a downward channel. Both moving averages are sloping downwards, and the RSI is in the negative zone, indicating that the bears are in control.
If the price retreats from the current level or the 20-day moving average ($50,054), it indicates that the market sentiment is still bearish and traders sell on rallies. This may pull the price down to the intraday low of $42,333 on December 4.
This is an important level for the bulls to defend because if it breaks, the bears will try to push the price below the channel’s support line. If they manage to do this, the sell-off may intensify further.
The area between US$39,600 and US$37,300 may become a strong support, but if the bulls fail to push the price above the 20-day moving average, the decline may extend to US$28,800.
Conversely, if the price rises and breaks the channel resistance line, it indicates that selling pressure may be decreasing. Then the currency pair may rise to the 50-day moving average (56,524 USD), which may once again pose a serious challenge.
The bulls will have to push the price higher and maintain it above the 50-day moving average to signal the beginning of a rise to $60,000. This level may be a strong resistance, but if it breaks, the rebound may retest the all-time high.
The views and opinions expressed here only represent the views of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading action involves risk, and you should conduct your own research when making a decision.