Analyses

BTC Correction - Not the First One, Not the Last One Either – Analysis, 25 May

Building Facade Hexagon Technical Analysis Bitvalex 25 May 2021

Last week, one of the deepest corrections unexpectedly hit the cryptocurrency market. For example, the price of Bitcoin recorded approximately 50% decline:

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Source: CoinMarketCap.com

However, as some cryptocurrency enthusiasts outlined, such kinds of panic sell-offs are nothing new to the market, and things like this happen and will continue to happen as well.

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Source: Twitter

Nevertheless, many people panicked and sold their cryptocurrency. Most of them are supposed to be the newbies who have entered the market recently and have expected to become rich in just a short period. In the cryptocurrency world, the real hodlers consider this group of people as crypto tourists. That is why the crypto bulls see the current crypto sell-off as one of these crypto tourists' wipeout events.

And, although the crypto bulls expect the market to recover soon and resume the uptrend, some fundamental factors are worth keeping an eye on. The 5-year US Treasury yields have started to increase – an initial signal that the major central banks all over the world may slow down with the process of injecting excessive amounts of liquidity into the global financial system:

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Source: Ycharts.com

Interestingly, the yields on the Treasuries started to increase in the last days of February, precisely when Bitcoin began forming the current local high at levels close to $60,000.

We all know that one of the key factors or drivers behind the solid price increase in the crypto market that started in the second half of 2020 was the extremely loose monetary policy conducted by the major central banks because of the Covid-19 pandemic.

Cryptocurrency is viewed as a hedge against loose monetary policy. Now the yields are starting to increase, and if they continue to do so, the cryptocurrency market may lose one of its current drivers. In this case, the market may start to consolidate, initially, in a broader range with a lot of volatility.

After the flash crash last week, the cryptocurrency market is trying to stabilize. At the time of writing, according to Coin360.com, one Bitcoin costs €31,933.18 (+6.23%), one Ethereum – €2,179.40 (+16.14%), one DOGE – €0.2986 (+8.52%), and one UNI – €20.86 (+29.66%): 

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Source: Coin360.com (Daily crypto market performance)

Now let us look at the price charts of the leading cryptocurrencies against the euro in the most noteworthy time frames.

BTC/EUR

In the daily chart (1D), the price of Bitcoin has dropped to the level of the local low that formed at the beginning of the year:

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We think that the range of the previous local low will serve as solid support for the price of Bitcoin. Moreover, the 360-day Moving Average (yearly MA) is very close to this range as well. That is why we think that BTC/EUR may try to rebound and resume the uptrend.

However, for this to happen, first, BTC/EUR has to break the downtrend in the 30-minute chart (30M):

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As can be seen from the chart, right now, BTC/EUR is testing the upper line of the Descending channel (downtrend). If the price chart exits the channel in the upward direction, then we will consider it as a small bullish signal indicating that BTC/EUR is trying to resume the uptrend.

ETH/EUR

In the daily chart (1D), ETH/EUR has returned into the Ascending channel (uptrend) – one of the scenarios we outlined in our previous analysis:

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According to the chart, ETH/EUR received support at the 90-day Moving Average (MA 90), and the trend line and rebounded. We think that these technical indicators/formations will continue to serve as support for the price in the near future.

In our estimation, if the bearish pressure in the crypto market diminishes, then many traders will start opening long positions trying to catch the next bullish wave within the channel.

DOGE/EUR

Because of the ongoing correction in the crypto market, the price of Dogecoin has dropped below the level of the previous local high and the 30-day Moving Average (MA):

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However, as can be seen from the chart, DOGE/EUR has received support at the level of the previous local low and the 90-day Moving Average.

We think that during this week, the price of Dogecoin will try to find direction. That is why, in our estimation, DOGE/EUR will continue to fluctuate between the 90-day MA (approximately €0.19) and 30-day MA (approximately €0.38) without any clear direction.

UNI/EUR

In the daily chart (1D), UNI/EUR has exited the Ascending channel (uptrend) in a downward direction, thereby putting an end to this uptrend:

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Theoretically, the price may bounce off and try to reach the lower line of the channel if the sell-off in the crypto market stops. Nevertheless, trying to catch falling knives is quite a risky undertaking. That is why, for now, we will stay away from the market and wait for some clear and more reliable signal pointing to bullish sentiment renewal.

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The analysis is purely informational and does not constitute investment, financial, trading, or any other sort of advice and you should not treat any of Bitvalex's content as such. Bitvalex does not recommend that any cryptocurrency should be bought, sold, or held by you. You are solely responsible to conduct your own due diligence and consult an advisor before making any investment decisions.


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