Introduction:
After the initial excitement surrounding the prospect of spot Bitcoin ETF applications by US-based companies, the crypto market experienced a downturn this week. The largest cryptocurrency, Bitcoin, faced a bearish reversal as it retreated from the resistance zone of $31,400-$31,300 that had held for several months. As a result, the price of Bitcoin dropped by 4.5% to retest the demand zone at $29,640. This raises the question: Will BTC continue its downward projection from here?
Bitcoin's Consolidation Phase:
Over the past two weeks, Bitcoin has been oscillating within a narrow range between $31,300 and $29,640. On July 7th, the coin price bounced from the range's support level, indicating that buyers are still defending higher prices and prolonging the sideways action. If the bullish momentum persists, we may see a 2.7% rise as Bitcoin rechallenges the overhead resistance. However, a breakout from this range is needed to determine the potential trend in the near future.
Potential Bullish Scenario:
Considering the current consolidation as a temporary break from a high-momentum rally, it is likely that buyers will resume the upward trend once bullish momentum recovers. A breakout above $31,300 could extend the bull run to $33,000, followed by $34,850 and $37,470.
Bearish Scenario and Support Levels:
However, if the Bitcoin price breaks below the $29,640 support, a longer correction mode may ensue. This breakdown could result in a 5% drop, reaching the combined support of $28,100 and the 50% Fibonacci retracement level. As long as the horizontal support and a long-coming trendline remain intact, holders of Bitcoin can maintain their bullish sentiment.
Technical Indicators:
The Average Directional Index (ADX) shows a slight downtick in the daily slope, indicating that buyers still possess sufficient strength. The rebound from the 20-day Exponential Moving Average (EMA) also suggests that market sentiment remains aggressively bullish.
Conclusion:
The recent downturn in the crypto market has impacted Bitcoin's price, leading to a retest of the demand zone. While the consolidation phase suggests a temporary break, the market awaits a breakout to determine the next major trend. A bullish scenario could see Bitcoin reclaiming higher resistance levels, while a bearish breakdown may lead to a more prolonged correction. Traders and investors will closely monitor support levels and technical indicators to gauge the overall sentiment and direction of Bitcoin in the coming days and weeks.
