Bitcoin (BTC), the world’s largest cryptocurrency, is facing a possible correction as it loses support at a critical level and trades at $27,300. Technical analysis shows that the Parabolic SAR has turned bearish on the daily chart, indicating that a downturn is possible soon. Bitcoin price has also fallen below the 50 exponential moving average (EMA), a critical support level.
The Parabolic SAR is a popular technical indicator to identify potential trend reversals in the market. When the indicator turns bearish, it suggests that the price of the asset could be lower. In this case, the bearish signal on Bitcoin’s daily chart could mean that the cryptocurrency is due for a correction.
Brace for Bitcoin correction as support levels falter
According to telling trader and technical analyst Ali, if Bitcoin fails to stay above the 50EMA level, it could confirm a possible correction to USD 26,200 or even USD 25,000. In addition, Bitcoin’s failure to hold the 50EMA as support is another warning sign for traders.
The 50EMA is a widely viewed moving average that shows the average price of an asset over the past 50 days. When the price of an asset falls below this level, it can be seen as a bearish signal, indicating that the asset may be moving lower.
Currently, Bitcoin is down more than 4% in the last 24 hours and is trading below the 50EMA; this could confirm a possible correction to $26,200 or even $25,000, according to the analyst. These levels represent significant support zones for Bitcoin; the cryptocurrency could see a further downside if they don’t hold on.
In addition, according to Ali, the Bitcoin network is showing signs of contraction, with declining user adoption and a series of lower highs and lower lows. This declining trend in wallet activity may soon be a signal for a Bitcoin price drop.
As BTC adoption declines, so does demand for the cryptocurrency. This ultimately puts downward pressure on the price of BTC as fewer people are interested in buying and holding the cryptocurrency. The trend of lower highs and lower lows across the Bitcoin network suggests that the cryptocurrency’s price is headed for a correction.
Added to this, more bad news for Bitcoin bulls mounts; Bitcoin’s largest whale shark, owned by Binance, is very active in the market, having moved $2.26 billion worth of Bitcoin in just four transactions, according to Santiment. facts. This sudden move has caused the supply of Bitcoin on exchanges to fall from 6.78% to 5.84%, indicating that the whale could transfer Bitcoin to a cold storage or custody solution.
BTC above USD 25500, long term bullish trend signals
Despite recent market fluctuations, BTC is still showing a strong upward trend, according to the analysis from the weekly BTCUSD chart from The Birb Nest, a cryptocurrency and investment platform. Moreover, BTC is trading above the 200-week rising trend and the 50-week flattening trend, which is a positive indicator.
The Birb Nest has pointed out that the uptrend is likely to continue if Bitcoin remains above the $25,500 level. However, the crypto analytics firms limit a potential visit to the $25,000 level. This level is seen as an important support level for Bitcoin, and a continued hold above it could indicate a bullish outlook for the cryptocurrency.
In addition, The Birb Nest has noted that there has been a weakening relationship between Bitcoin and S&P 500 prices in recent weeks. This is reflected in the 7-week correlation coefficient, which stands at 0.39.
Although the correlation between Bitcoin and the S&P 500 has weakened, it remains positive. This suggests that both assets still have some similarities in terms of price movements. Therefore, if there are gains or losses in large-cap stocks, Bitcoin is likely to be affected somewhat.
Featured image of Unsplash, chart from TradingView.com