Why shouldn’t a 30% drop in Bitcoin’s price be a surprise?

Bitcoin’s price faces the last major hurdle at $16,000 before a possible race to new all-time highs, but a 30% correction is also possible.

The Bitcoin (BTC) price rally came to a halt as Joe Biden was announced as the winner of the 2020 presidential election over the weekend, falling from $15,500 to $14,400.

However, Bitcoin continues to show strength as it once again faces the final resistance zone at $16,000.

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This final endurance zone is the last major hurdle before a potential race to a new all-time high. However, it is increasingly likely that a reversal will occur with the index of fear and greed currently at the same levels as the peak in the summer of 2019.

The weekly level at $16,000 is likely to be a strong resistance

Weekly chart of the BTC/USD pair. Source: TradingView
The weekly Bitcoin graph shows the $16,000 resistance zone as the final resistance zone before a new historical high can be tested.

The weekly chart also shows support levels if the Bitcoin price begins to correct. A correction would be relatively healthy if you change the previous resistance levels to become a new support.

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If a correction occurs, the weekly level of around $11,600-12,000 should be considered as a possible support zone. Such a correction would mean a drop of about 30% in the Bitcoin price. A 30% correction is quite normal, as this happened a few times during the previous bullish cycle in 2017.

The ‚Extreme Greed‘ index is similar to the summer of 2019
The Crypto Fear & Greed index is a useful indicator for measuring current market sentiment. In extremely negative periods, the index uses the colour red to mark the overall sentiment.

However, once the general market sentiment reaches the maximum upward phases, including euphoria, the number approaches the maximum value of 100. The current number is 90, or „extreme greed“. This level has only been seen once in the history of this indicator, which was on 27 June 2019.

That date was the actual high for the year, as the price of Bitcoin reached $13,700 and has been corrected by 50% since then.

Multiple indicators and areas therefore identify possible resistance zones, suggesting that a correction should not come as a surprise.

Bitcoin dominance continues its fourth quarter rally

Weekly graph of the Bitcoin domain. Source: TradingView
The Bitcoin domain continues its ascent as it always does in the fourth quarter of the year.

Historically, the Bitcoin domain peaks in December, after which the first quarter of the year is an excellent time for altcoins.

Based on this historical fact, it’s still time to be cautious with the altcoins despite the slight upturn in relief in recent days. If Bitcoin decides to consolidate towards the $11,600-12,000 area, there’s almost no chance of altcoins increasing in the opposite direction of BTC.

In that light, Bitcoin has to establish a limited range construction that gives the altcoins some room to catch up.

What’s next for the price of Bitcoin?

Weekly chart of the BTC/USD pair. Source: TradingView
A very likely scenario would be a corrective period after this wave of momentum. Such a recovery period would mean stabilisation and a natural build-up of markets, rather than a continuous parabolic movement.

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In that perspective, a massive drop in a candle, which would be quickly bought, is not unlikely. After that, the ideal scenario for the bullish would be the continuation of range and sideways resulting in compression and a build up to a strong upward breakout.

The best period to anticipate a possible upward movement for altcoins would be when Bitcoin has finished correcting. Historically, the best period to enter the altcoin market is December and January, so traders should be on the lookout for a possible BTC retracement in the coming weeks in case history repeats itself.