Bitcoin has climbed back above $82,000 has led to a bullish belief among investors. However, an interesting technical analysis suggests that the rally could still be part of a corrective structure, and not the start of a purely impulsive breakout.
That difference is important because the analysis shows that Bitcoin is now approaching a resistance band that could decide whether the recovery continues or turns into another trap for late buyers.
Bitcoin is entering a major resistance zone
The BTC price rose above $80,000 again this week, with the movement supported by strong flows in Discover Bitcoin ETFs. However, crypto analyst Tara is not convinced that this bullish move tells the full story.
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Taras prospects are built around it Bitcoin’s reaction to the 0.382 macro retracement level. According to the analyst, the Bitcoin price broke above this level without first to achieve stronger support underneath. That has created a situation where the price action can still move higher, but the move could be vulnerable because the base under the rally is not as strong as bulls would like.
Therefore, Bitcoin’s inability to gain solid support after breaking above a key macro-Fibonacci level has left the asset exposed and now in a key resistance zone spanning between $85,200 and $93,000.
The short-term structure has clearly improved from early February’s lows around $60,000, but Tara’s chart points to several overhead levels that matter now. The first major red resistance line is around $85,288, which corresponds to the 0.382 retracement on the projected structure. Above that, the 0.5 retracement level near $93,099 becomes the bigger test.
Based on the analyst’s numbers, the current rally should be a counterwave B move within a larger corrective ABC trend. The analyst described Wave B as one of the most misleading phases of a market cycle because it can lead traders to believe that the correction is already over. However, the range between $85,200 and $93,000 represents the area where the Wave B rally could start to lose steam.
What comes next? The crash risk
With Bitcoin price approaching resistance, the outlook is what we can expect based on what could happen if Bitcoin price is rejected in that zone. The next phase could be lower and punish buyers who come in late.
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The chart outlines this exact possibility with two projected downward paths from the upper resistance area. One starts around $85,000, and the other starts closer to the $93,000 level. Both paths suggest that resistance band rejection would be possible bring the Bitcoin price below $60,000.
A sustained break above $85,200 would bring the $93,000 region in action. A clean move above $93,000 would then weaken the bearish corrective stance. At the time of writing, Bitcoin is trading at $79,742, decreased by 2% the past 24 hours.
Featured image from Getty Images, chart from Tradingview.com