Forex Analysis & Reviews: 08.02.2022 - Bitcoin reached new local...

08.02.2022 03:50 PM

Bitcoin reached new local high, rebounded from important resistance area, which could provoke correction

After a two-month correction, the main cryptocurrency continues to recover on large purchase volumes. During the Asian session, Bitcoin managed to test the important $45.5k level. The market has cheered up and is increasingly taking active steps towards cryptocurrency assets. But there is a high probability of "cooling" investors' fuse due to the $45.5k mark.

This level is an important pivot point for bears and a mirror level where large sales volumes are concentrated. This level was an important support line in December, at the equator of the corrective movement. Now it has become a point of concentration of sell orders and descending resistance lines. I suppose that the market will meet fierce resistance here.

Most likely, we are waiting for a local rollback after a confident impulse upward movement. Let's start with the obvious facts: Bitcoin broke $8k with just one bounce and no visible corrective movements. At the same time, the number of long positions with large leverage increased significantly as it consolidated above $40.5k. This is displayed on technical indicators: the stochastic has jumped into the overbought zone, and the RSI is at the upper border of the green zone. All these data testify to the local overheating of the market.

Against the backdrop of an increase in the price of bitcoin, Glassnode recorded a massive withdrawal of BTC coins from cryptocurrency platforms. The total volumes reached $800 million, which is a sharp jump compared to the January period. A similar picture is in the futures market: open interest in BTC futures has reached a local maximum.

Let's not forget the stock market, which ended Monday on a negative note due to negative reporting and a historic drop in Meta (Facebook) shares. SPX and NASDAQ hold key support zones, but the price movement hints at a possible decline in the cryptocurrency market.

With this in mind, I assume that in the near future Bitcoin is waiting for a local correction. The first significant support zone for the asset will be $39.6k-$40.2k. But if the price continues to stay in the current range of $43k-$45.5k for some time and a retest of $45.5k occurs, then a sharp squeeze to $36.1k may occur. This will cool the market and knock out high leverage longs. Subsequently, liquidity will be collected from the $36k-$42k range and the price will continue to recover.