Following a clear rejection of $10,300 — a price level that analysts said would mark decisive resistance — the cryptocurrency tanked below $10,000, then $9,700, then $9,500, falling as low as $9,250 on some exchanges.
This meant that at the worst of Wednesday’s drop, the cryptocurrency was down 10.2% from the daily high, a brutal showing for bulls that were hoping the cryptocurrency was poised to continue past local highs.
Unsurprisingly, this move caught traders across the field with their pants down. Case in point: data from crypto derivatives tracker Skew.com indicated that during this move, at least $120 million worth of long positions were liquidated on BitMEX alone.
While the cryptocurrency has since stabilized above $9,500, managing to close Wednesday’s candle above this price, some analysts are fearful that this move marked a clear break of market structure, suggesting a return to a bear trend.
Analysts Begin to Fear Steeper Short-Term Retracement
Prominent cryptocurrency trader Hsaka remarked that he doesn’t think Bitcoin will hold a crucial level “for much longer,” drawing attention to the below chart, which shows that the cryptocurrency is about to break below $9,350.
A strong move below $9,350 could open the cryptocurrency to a deeper retracement, Hsaka’s chart implies. As his chart depicts, $9,350 has been essential for bulls in bull trends and essential for bears in bear trends, with the level acting as both support and resistance on multiple occasions over the past year.
I don't think this 9350 level holds for much longer. pic.twitter.com/P0YLaxKmlk
— Hsaka (@HsakaTrades) February 20, 2020
The importance of Bitcoin holding $9,300 has been echoed by another prominent trader, Josh Rager of Blockroots.
In a message published to his Telegram channel, the analyst wrote:
We’re sitting at a daily support at $9550s – but needs to hold or $9300s again…. with a second retest, that could lead to $8600 to $8700. Level by level is the key.
As to whether not Bitcoin will continue lower in the coming days to break below $9,350, analysts are divided, though there are some accurate voices calling for a further retracement.
Smart Contracter, an analyst who called Bitcoin’s $3,125 bottom in 2018 months in advance and almost down to the dollar, recently posted an analysis in which he noted that LTC is likely to retrace by another 15% from here. This is pertinent as the altcoin has led BTC and the rest of the crypto market on multiple occasions over the past year.
Bitcoin’s Long-Term Trend Still Shaping Up Positive
Despite the harrowing drop and the potential for the cryptocurrency to retrace further, many are convinced that Bitcoin is still moving into a long-term bull phase.
Cryptocurrency analytics provider Santiment noted on Wednesday (even after the drop) that one of their leading indicators, which tracks the price of BTC over its Network Value to Transaction Ratio (NVT), is suggesting that the cryptocurrency is undergoing a “reversal into the [long-term] bull territory.”
Before you panic sell on today's $BTC drop back below $9,600, keep in mind that one of @santimentfeed's top leading indicators for our Pro subscribers is continuing to confirm #Bitcoin's long-term reversal into bullish territory. Access our NVT model now! https://t.co/53wvtfLeuO pic.twitter.com/CIR5VE5XcR
— Santiment (@santimentfeed) February 20, 2020
The sentiment that BTC is on the verge of a fresh full-fledged bull market has been backed up by a swath of other indicators.
For instance, a golden cross was just printed on the one-day chart of Bitcoin. For those unaware, at the start of the week on Sunday or Monday (depending on which chart you consult), the 50-day moving average and 200-day moving average crossed, with the former crossing over the latter. Analysts in traditional markets see this as a sign that a decisive uptrend has formed.
Indeed, data this writer compiled shows that the golden cross in 2012 led to a 20,578 percent surge in the price of Bitcoin, and that a golden cross in 2015 led to the 6,739 percent rally that took BTC to just shy of $20,000.