Bitcoin has almost completed another rollercoaster week in which it met its second major price correction of 2021.
Having hit $58,300 all-time highs, bulls lost steam with a retracement becoming a full-on dive in which Bitcoin lost 20%. Subsequent ranging combined with fresh weakness has taken weekly losses to almost 25%.
At the same time, many are more optimistic than ever about the outlook, and data suggests that investors big and small are “buying the dip.”
Modern Consensus takes a look back at the week’s action and considers what might lie ahead for BTC in the coming days and beyond. We also publish a weekly markets outlook every Monday, the latest edition of which you may find here.
All eyes on the dip
The week began with the start of the comedown, sparking a process which lasted until Bitcoin bottomed at around $45,000 two days later.
Versus the previous near-vertical upside, the bearishness took many by surprise, even as the drop turned to ranging behavior within a defined corridor—an identical phenomenon to earlier in 2021.
The similarities did not end there—just as in January, volatility was accompanied by a flood of positive news for Bitcoin, notably in the form of large buy-ins from investors known and unknown. As of Friday, these are continuing, with Coinbase Pro seeing multiple spikes in outflows to private or custodial wallets.
MicroStrategy, which has become a household name in the cryptocurrency space, upped its Bitcoin holdings to over 90,000 BTC, representing 95% of its treasury. Square, on a small scale, likewise added to its allocation by an order of magnitude this week.
In addition to the supply squeeze, a multi-year battle between stablecoin issuer Tether and its sister exchange Bitfinex on the one hand and New York’s attorney general on the other ended in a win for the defendants, who settled fairly serious fraud charges for a decidedly modest $18.5 million.
Against such a positive backdrop, however, there was a distinct lack of positive press for Bitcoin in the mainstream, which overwhelmingly favored the narrative that Bitcoin had overshot its capabilities and that the market would now more or less repeat its 2018 bear market.
The three most popular articles on Bloomberg at press time all focus on Bitcoin’s price dip.
Trader: Watch Bitcoin’s 21-week moving average
With Friday seeing two-week lows on BTC/USD of $44,150, traders are busy advocating increasing one’s position while the opportunity allows.
“I am currently investing in #Bitcoin, not trading it. I’m buying for my long term savings account, not concerned with short term price moves,” popular trader Scott Melker said in multiple tweets on the day.
Melker said that there were bullish divergences with relative strength index (RSI) on “almost every timeframe” with the need for Bitcoin to hold around the $46,000 zone to preserve the chances of stabilization. In the event, a drop to the lows occurred but was met with a bounceback.
“Bull div, hidden bear div, bigger bull div coming out of oversold on RSI. These have been very reliable signals. Confirming 6 hour down to 1 hour,” an update read.
“Do with this information what you may, I bought more $BTC.”
Another remark focused on the fact that the last Friday in the month contains expiry of Bitcoin options, something which has traditionally exerted downward pressure on price action.
“Worth watching,” Melker added.
For fellow trader Michaël van de Poppe, meanwhile, it was all about Bitcoin’s ability to reclaim support at $48,500 and higher to allow for bullish continuation.
“If we look at the daily chart for Bitcoin we can see that we’re currently in a support zone,” he summarized in a fresh YouTube update.
Zooming out, van de Poppe reiterated the importance of Bitcoin’s 21-week moving average (21 WMA), currently at around $28,115, in providing more definitive support. This level is rising sharply, and may help dictate both near and long-term performance for BTC/USD.
Specifically, the month of March, like in 2016 among other years, could provide some cooling-off activity before bulls regain control later. As such, van de Poppe disagreed that price action is mimicking 2017’s dash to $20,000, instead arguing that 2016 now forms the basis for current behavior.
“That’s also why I assume that we’re going to have a big altseason in summer, meaning that Bitcoin is just going to crawl up, and that’s the best nature for altcoins to behave in,” he said.
A look at the top ten cryptocurrencies by market cap shows mostly copycat moves by altcoins as Bitcoin falls, with Litecoin the worst performer with 13% daily losses and largest altcoin Ethereum down 8.8% at $1,476.