The bitcoin price has been falling and falling over the past four days. Since its rejection at $19,420 on 7 December, the dominant cryptocurrency has struggled to see fresh momentum.
For most traders, the support levels of $18,500 and $18,000 have been key to holding BTC’s short-term bullish market structure.
Throughout December, at least until the recent correction, Bitcoin had consistently rallied from $18,500. But – history often reverberates – on the third drop to $18,500, BTC quickly fell below it.
In the short term, traders apparently expect the Bitcoin Millionaire scam bitcoin price to test the $16,500 to $17,000 support area.
The 15-minute chart of the bitcoin price. Source: BTCUSD on TradingView
Why $16,500 to $17,000?
There are two compelling reasons why traders expect a deeper bitcoin correction in the short term:
First, the bitcoin price broke through two key support levels at $18,500 and $18,000 – and did so without a strong buyer reaction.
Second, historical fractals suggest that the bitcoin price typically experiences another major decline after a relief rally before bottoming out.
On 8 December, before the bitcoin price experienced a sharp correction, the pseudonymous trader „Crypto Capo“ wrote that a major decline could be coming. At the time, BTC had experienced a small rally, which the trader called a „dead cat bounce“. Since then, BTC has fallen from $18,300 to $17,700.
Other traders also foresee $17,000 as the next potential low for bitcoin, as this marked the top of a major weekly candle in January 2018.
In technical analysis, previous highs often serve as support areas when an asset’s price breaks out.
Charts with short time frames, such as the 4-hour chart, also show that $17,000 is a critical support area.
Some traders believe that Bitcoin could fall even lower than the $17,000 support level. If so, it could see a double bottom in the $16,000 region.
A strong argument why BTC is unlikely to fall below $16K
When the bitcoin price experienced its first major correction during its recent multi-month uptrend, it fell to around $16,300.
At the time, the market was unsettled because BTC reached $19,300 just two days before the abrupt correction.
But when BTC reached the $16,000 region, the US market saw strong buyer demand. Avi Felman of BlockTower commented that there was a switch from „weak hands to strong hands“ on Coinbase as BTC bounced out of the $16,000 range.
So if the bitcoin price falls back into the $16,000 region, there is a good chance that buyer demand from US investors will kick in.
In recent weeks, the Time-Weighted Average Price (TWAP) algorithm has led to significant buyer demand in the market.
Analysts speculated that since hedge funds and institutions typically use TWAP algorithms to buy assets, institutional demand for Bitcoin drove the price up.
In recent days, TWAP algorithms have not been buying as aggressively, which may have increased the selling pressure on BTC.
Given that BTC has risen fourfold since the crash in March, a short-term consolidation could further strengthen BTC’s medium-term uptrend.