Bitcoin took an 8% nosedive following the rejection from a major resistance level. Despite the significant downturn, multiple technical indicators estimate that the carnage is not over yet. 

The $10,500 resistance zone proved to be key to Bitcoin’s trend once again as it prevented it from advancing further. 

The last time this price barrier held was in late October 2019 following Chinese President Xi Jinping’s decision to “seize the opportunities” presented by blockchain technology. During that time, the flagship cryptocurrency plunged 38% after getting rejected by this resistance level. 

Bitcoin plummeted from a high of $10,480 to a low of $6,480 in mid-December 2019. Now, a similar scenario appears to be taking place.

Thus far, the pioneer cryptocurrency has retraced 8% following the rejection off the $10,500 resistance zone. Yet, there are two technical patterns that could form, estimating a steeper decline before the continuation of the bullish trend.

First, a cup and handle price pattern could be developing on BTC’s 1-day chart. This technical formation is considered a bullish continuation pattern and is mostly used to identify buying opportunities. 

At the moment, Bitcoin appears to be creating the handle of the pattern since it is currently pulling back. Support could be found around the 38.2% or the 50% Fibonacci retracement level before returning to the $10,500 resistance area. These levels of support sit at $8,950 and $8,500, respectively.  

The cup and handle price pattern forecast a 38% target upon the breakout point, which could take BTC to $14,500. This target is determined by measuring the height between the bottom of the cup and the resistance level, then adding that distance upward from the breakout point.

Second, a head-and-shoulders pattern could also be in the works. Although this technical pattern forecasts an upside target similar to the cup and handle price pattern, it oversees a steeper correction.

Bitcoin could fall to the support zone between $7,800 and $7,330 to form the right shoulder before surging back to the neckline at around $10,500. Breaking above the neckline, following the downward momentum, could send this crypto up 38% to around $14,500. 

This target is determined by measuring the distance between the head and the neckline and adding it to the breakout point.

It is worth noting that a spike in demand could allow Bitcoin to surge to new yearly highs before completing any of the patterns mentioned above. 

Therefore, the $10,500 barrier can be seen as the catalyst for the next major price movement. Closing above this significant price hurdle would take BTC to make the first higher high since the peak of late June 2019. 

Upon the breakout point, investors would likely enter a FOMO (fear-of-missing-out) stage pushing this crypto to the next levels of resistance between $11,500 and $13,000.

The current correction that Bitcoin is going through could be the opportunity sidelined investors have been waiting for to get back into the market. 

Although it is uncertain how low BTC would go, dollar-cost averaging positions could be the best way to “buy the dip,” according to Sawcruhteez, a renowned financial analyst. 

Sawcruhteez maintains that by using exponential moving averages (EMA) market participants can “scale into a dip.” The chartist uses a combination of the 50 and 200 EMA in the 4-hour and 1-day charts to time his entries. He tends to dollar-cost average his long positions by distributing 10% of his capital around the 50-four-hour EMA, 20% around the 200-four-hour EMA, 30% around the 50-day EMA, and 40% around the 200-day EMA. 

The main idea behind this strategy is to increase exposure to Bitcoin as it depreciates while improving the cost basis, according to the host of Sawcruhteez Streamz. 

Once all the buy orders have been executed, the technical analyst remains patient looking for a quick rebound off the daily EMAs before placing a stop-loss order. If Bitcoin fails to stay above the 50 and 200-day EMA, he would likely exit his long position.

“I do not like having a set stop-loss [orders] on the books, in the event of a spike low that would wipe me out right before the bounce. Instead, I will use the death cross as my stop-loss, as well as a potential area to flip my position and go short,” said Sawcruhteez. 

Employing other technical indexes to confirm potential price entries is also important. For instance, Sawcruhteez uses horizontal support levels that are in confluences with the EMAs. These zones represent a “low risk [and] high probability opportunity to buy the dip,” according to the analyst. 

Sawcruhteez concluded by stating that consistent dollar-cost averaging allows investors to alleviate the anxiety one gets when the market appears to be “running away.” This is one of the most useful ways to remain calm while waiting for a potential price dip. 

The Crypto Fear and Greed Index (CFGI) appears to have predicted the recent downturn. As market participants became overwhelmingly bullish, this fundamental indicator began sensing high levels of greed reaching a value of 65 (greed) on Feb. 13. The last time the CFGI was this high was in early August 2019, when it was at 66. During that time, Bitcoin plummeted by nearly 23% from a high of $12,325 to a low of $9,520. 

Now, a similar correction appears to be unraveling, but this time it could represent an opportunity to get back into the market for many sidelined investors. 

The post Bitcoin Plummets as Investors Wonder Where to Buy the Dip appeared first on Crypto Briefing.

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