Last week, Bitcoin experienced another wave of correction, dropping its price to around $88,000 as the crypto market continues to face declining investor appetite. Although the major cryptocurrencies are experiencing some relief, the approaching monthly close signals that the market is at a critical juncture that could determine the direction of prices in February.
Bitcoin market considers rebalancing or complete collapse
According to veteran analyst KillaXBT, Bitcoin is set for a pivotal monthly close next week, as recent price movements suggest the market is nearing an inflection point. Notably, after BTC breached an external high near $94,600 earlier this month, it has since faced a firm rejection, pushing the price back to the lower end of its recent range between $88,000 and $90,000.
Rejections from these highs result in significant upward wicks on higher time frames, a structure that often indicates aggressive selling pressure. However, KillaXBT explains that due to fluidity, such wicks are often partially or fully retraced. With still a trading week left before the monthly candlestick closes, market analysts are speculating that there are three main scenarios that could determine the direction of prices in February.
First, Bitcoin is likely to rise toward the end of the month, leading to a higher monthly closing price. In this scenario, February could begin with prices forming the top of the current wick, revisiting the low-to-mid $90,000s, and then potentially rolling over towards the $83,800 area later in the month.
In the second scenario, Bitcoin ends the month near current levels around $89,000, then seeks liquidity in the $91,000-$92,000 range in early February before returning to a downtrend. Interestingly, both scenarios are consistent with the idea that the market may rise first to rebalance liquidity before falling and resolving.
The third scenario presents a more severe outcome consistent with a potential collapse of the market. In this case, KillaXBT predicts that Bitcoin could fall back below its weekly and monthly opening price of $87,664 and close below this level by February. Analysts have described this scenario as “deeply bearish” as it increases the likelihood of a quick move towards lower support during the new moon.
In particular, KillaXBT favors the first two scenarios. This is because current sentiment is so bearish that it indicates that most investors expect little move to higher prices. However, analysts also highlight that under any scenario, the loss of the $83,800 support would significantly change the outlook for remaining long exposures.
Bitcoin price overview
At the time of writing, Bitcoin is trading at $89,645, up modestly by 1.4% over the past day.
Featured image from Flickr, chart from Tradingview
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