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BTC’s recent drop has raised many concerns regarding its long-term future. After all, the world’s largest digital asset fell by 11% in a single day, the highest percentage decrease since June 21. When the candlewick is taken into consideration, losses might reach 19.2 percent. Such drops frequently result in panic selling across the altcoin market, as seen over the last few days.
While retail traders suffer substantial losses, it is critical to assess the Bitcoin market in a broader context. In reality, a closer look at BTC’s daily chart reveals that the price remains above important levels. Furthermore, its most recent drop did not pose a big concern, at least not yet.
Bitcoin Daily Chart
The chart of BTC revealed an intriguing link with its 200-SMA (green). A close below this long-term moving average has frequently resulted in a prolonged down market.
Consider the sell-off on May 19th. After reaching lows as high as $29,400, Bitcoin took over three months to convincingly close above this barrier. A decline below the 200-SMA might sometimes result in an immediate positive recovery. This happened three times in early August as buyers refused to relocate south. If the latter pattern continues, market participants should not expect a prolonged sell-off.
Based on BTC’s moves since late July, the digital currency is now clearly on an uptrend. Higher highs and lower lows were broken up by impulsive drawdowns, but resistance hurdles were eventually broken through. To break this trend, BTC would need to close below the swing low of $43,800 set on August 12th.
A break below $42,400 would set off alarm bells throughout the market.
As the price stabilises, the following few days may see some sideways action below the 20-SMA (red). Buyers will regain control whenever BTC breaks convincingly above its 20-SMA.
For the first time since July 21, Bitcoin was trading near the bottom end of its Bollinger Bands. BTC has rebounded back from the lower band several times in the last few months, and the same can be predicted in the future. However, the 20-SMA (red) would limit any short-term gains.
The RSI’s drop below a down-channel was concerning, but an uptrend is usually not disrupted until the indicator sits over 40-45. On the negative side, the Awesome Oscillator showed lower peaks. This suggested that the market’s buying pressure was steadily weakening.
Flash crashes are frightening occurrences. Particularly in the Bitcoin market. Indicators typically shift to negative positions, and there is always the possibility of a prolonged downturn.
However, such modifications are thought to be beneficial in the long run. While the market may continue to fall, BTC must remain above $43,800 to see a faster rebound on the charts. Observers should not be concerned about a prolonged decrease as long as Bitcoin remains over $42,400.