Bitcoin’s upward momentum has encountered a significant barrier upon reaching a key resistance zone. Despite the prevailing bullish sentiment in the market, there are indications suggesting the possibility of an impending temporary consolidation.
Technical Analysis
By Shayan
Bitcoin Price Analysis: The Daily Chart
After a consolidation phase near the critical $39K mark, buyers gained momentum, propelling the price above the pivotal psychological resistance of $40K. This triggered an impulsive surge, reinvigorating optimism in the market. However, Bitcoin’s formidable uptrend encountered a temporary obstacle upon reaching a crucial resistance zone, encompassing the static $44K resistance and the upper trendline of the ascending channel. Consequently, heightened selling pressure ensued, resulting in a 10% decline.
Bitcoin now finds itself within a pivotal range defined by the $44K resistance and substantial support at $40K. Consequently, the market is anticipated to undergo a consolidation phase within this range until a valid breakout materializes.
The 4-Hour Chart
A closer examination of the 4-hour timeframe reveals that following a significant impulsive surge beyond the $40K level, Bitcoin achieved its yearly high at $44.7K, indicating a bullish market sentiment among participants. However, the failure to establish a higher high led to the formation of a double-top pattern.
Subsequently, sellers entered the market, triggering a notable rejection and a 10% decline. As previously mentioned in our analysis, the correction concluded as the price reached the substantial dynamic support range between the 0.5 and 0.618 Fibonacci retracement levels, aligning with the recent ascending trendline.
Nevertheless, Bitcoin is poised to enter a mid-term consolidation phase within this dynamic range until a breakout occurs. However, should the price breach the trendline, the $40K support region will serve as the next crucial level of interest.
On-chain Analysis
By Shayan
The accompanying chart provides a comprehensive overview of Bitcoin’s price dynamics in conjunction with the MVRV metric, a key indicator representing the ratio of the coin’s market cap to its realized cap. This metric serves as a gauge to assess whether the current price is considered overvalued.
In historical contexts, observing the MVRV metric entering the green zone during bearish market phases signifies that Bitcoin is trading in the undervalued territory, often indicating the formation of the cycle’s bottom. Notably, as depicted in the chart, instances where the MVRV metric spiked above 1 have consistently coincided with significant surges in Bitcoin’s price, marking the commencement of bullish market phases.
At present, the metric has undergone a substantial upswing, aligning with Bitcoin’s noteworthy uptrend as it reclaimed the pivotal $40K level. The recent ascent in the MVRV ratio from lower levels may suggest a transition from undervaluation to a phase characterized by anticipated growth. This shift hints at the potential initiation of a bullish cycle in the market.
