Bitcoin (BTC) has had a week of correction when the price fell from USD 58,000 to USD 44,000 within a few days. This decline sparked a panic reaction in the markets as the euphoria stopped immediately.
For example, the Crypto Fear and Greed Index fell to monthly lows of 56 after going above 90, or “extreme greed” for an entire month.
Crypto Fear & Greed Index. Source: Alternative.me
Such a panic reaction is not warranted, however, as corrections in a bull market often appear as a “reset” before resuming. This is organic and healthy, and is a great opportunity for traders and investors to buy the dip.
The $ 52,000 denial suggests another weakness
BTC / USDT 4-hour chart. Source: TradingView
The 4-hour chart is showing an obvious bearish trend from the previous high of $ 58,000. That high could be the spike for the months ahead, a period that may see a longer correction.
However, the price movement since that high of $ 58,000 points to weakness as each level of support turns into resistance, indicating further weakness.
The graph shows those flips where the $ 55,000 level was the first. After that, the price of Bitcoin fell significantly to the support zone around $ 45,000. This support zone held and resulted in a strong rally towards USD 52,000.
Unfortunately, that level was not broken for the bulls and was instead rejected, confirming further weakness in the market and further downward movements for BTC price.
This now paints a clear picture of the critical levels to be observed. Ideally, the support zone needs to be held between $ 42,500 and $ 44,000 for further upward momentum. If that fails, further weakness towards the $ 37,500-39,000 level can be expected.
However, if the support zone of $ 42,500 to $ 44,000 holds, then higher prices can be expected once Bitcoin crosses the resistance between $ 50,000 and $ 51,000.
The bullish structure is still intact
BTC / USD 1-day chart. Source: TradingView
While the lower time frames indicate weakness for BTC / USD, the higher time frames indicate a healthy correction. The market build is still very bullish as the graph above shows.
The previous spike was $ 42,000, after which the new support was set at $ 30,000. That last spike was easy to break when Bitcoin’s price soared to the high of $ 58,000. Hence, a correction to as much as $ 37,000 in this type of bull market could be considered healthy and organic.
Simply put, as long as BTC is above the $ 30,000 low from January 2021, the market can be classified as bullish.
March is often a month of correction
XBT / USD 1 week candle chart. Source: trade view
History shows that March is not the most optimistic month for the cryptocurrency market. In recent years, corrections were made in March. In particular, corrections of 15% to 60% were made in 2015, 2016, 2017, 2018 and 2020.
The most recent crash was caused by the Covid-19 pandemic and could be classified as a “black swan”. Still, corrections tend to be made in March and there could be another decline this year as well.
Corrections can therefore take several weeks and are often not completed in just one drop. Therefore, there is still a correction towards the $ 35,000 to $ 40,000 level.
XBT / USD 1 week chart. Source: TradingView
The main indicator to look out for is the 21 week MA. Often times, corrections tend to move in the direction of that line as the key point for a possible reversal. Hence, this 21-week MA could offer help with correction in the coming weeks.
Currently, the MA is around $ 28,000 for 21 weeks, although it should rise to $ 33,000-35,000 in the coming weeks.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading step is associated with risks. You should do your own research when making a decision.
