BTC is oversold and possibly ready for a relief bounce, but this could be a trap for altcoins and Bitcoin if
BTC is oversold and possibly ready for a relief bounce, but this could be a trap for altcoins and Bitcoin if bull volume fails to sustain.
Bitcoin (BTC) fell close to $34,000 on Jan. 21, which reflects a 50% decline from the $69,000 all-time high made on Nov. 10, 2021. Altcoins also could not buck the trend and faced intense selling pressure, which pulled the total crypto market capitalization to $1.6 trillion, a 46% decline from its November 2021 all-time high near $3 trillion.
It is not only the crypto markets that are facing selling by investors. The S&P 500 has also plummeted 8% year-to-date. However, gold has outperformed and risen about 1.76% during the period, cementing its billing as a safe haven asset.
Several retail traders who purchased Bitcoin near its all-time high are voicing their concerns on social media. However, El Salvador’s President Nayib Bukele does not seem to be worried by the recent fall as he recently announced a purchase of 410 Bitcoin at an average price of roughly $36,585 per coin.
Could Bitcoin and altcoins witness a bounce after the recent carnage? Let’s study the charts of the top-5 cryptocurrencies that may outperform if a relief rally starts.
BTC/USDT
Bitcoin plunged below the $39,600 to $37,332. support zone on Jan. 21, indicating panic selling. The selling continued on Jan. 22 and the price dipped to $34,008.
The sharp fall of the past few days has pulled the relative strength index (RSI) near the 20 level, suggesting that the selling may have been overdone in the short term. Usually, such oversold levels are followed by a consolidation or relief rally.
Recovery attempts are likely to face strong resistance in the overhead zone. If the $37,332 to $39,600 zone flips into resistance, it will signal that the sentiment remains negative and traders are selling on rallies.
The bears will then attempt to resume the downtrend and sink the BTC/USDT pair to the major support at $30,000. A break and close above the 20-day exponential moving average ($41,427) will be the first indication that bears may be losing their grip.
The 4-hour chart shows that the pair is trading inside a descending channel pattern. The bears pulled the price below the channel but have not been able to sustain the lower levels. This suggests strong buying by the bulls who have pushed the price back into the channel.
The pair could rise to the 20-EMA where the bears may again pose a stiff challenge. If the price turns down from this resistance and plummets below $34,008, the selling could intensify. Conversely, a break above the 20-EMA could open the doors for a possible rise to the resistance line of the channel.
LUNA/USDT
Terra’s LUNA token has been trading inside a descending channel for the past few days. The price dropped to the support line of the channel on Jan. 22 but the bulls purchased this dip aggressively as seen from the long tail on the day’s candlestick.
The LUNA/USDT pair could attempt a pullback to the moving averages and then to the downtrend line of the channel. If bulls propel the price above the channel, the pair could rise toward $87.90 and later to $93.81.
Contrary to this assumption, if the price turns down from the current level or the moving averages, it will suggest that bears are selling on every minor rally. The pair could then retest the support line of the channel. A break below this support could accelerate the selling.
The 4-hour chart shows that the relief rally has reached the 20-EMA which is an important level to watch out for. The marginally downsloping 20-EMA and RSI just below the midpoint indicate a minor advantage to bears.
If bulls drive the price above the 20-EMA, the pair could attempt a rally toward the downtrend line of the channel. Alternatively, if the price turns down from the current level, the bears will fancy their chances and strive to pull the pair to the support line of the channel.
ATOM/USDT
Cosmos (ATOM) turned down from the overhead resistance at $40 on Jan. 17 and plummeted to the 200-day simple moving average ($27.57) on Jan. 22.
The ATOM/USDT pair has rebounded sharply off the 200-day SMA, suggesting that bulls are defending this level aggressively. The buyers will now try to push the price to the 20-day EMA ($35.91).
A break and close above this level could indicate that the correction may be over. The pair could then rally to the critical overhead resistance at $44.80.
This positive view will invalidate if the price turns down from the current level or the 20-day EMA and breaks below the 200-day SMA. Such a move could open the door for a possible drop to $20.
The 4-hour chart shows a double top…
cointelegraph.com