Bitcoin fell sharply as it approached the $18,500 mark. Top analysts forecast that institutional investors will buy up the decline.
The Bitcoin (BTC) price fell sharply after reaching almost $18,500 on Binance and Coinbase. The collapse was accompanied by large sell orders on spot and futures exchanges.
BTC/USD 15-minute chart. Source: TradingView.com
As Cointelegraph reported earlier, traders expected a pullback as the BTC price approached the resistance zone between $18,000 and $19,000. The market reacted sharply to the first re-test of this zone in almost three years.
Bitcoin confirmed that $18,500 is an important short term resistance.
There are two reasons why Bitcoin experienced such a rapid decline to almost $18,500. This caused other crypto currencies such as ether (ETH) to decline even more sharply.
On the one hand, the 18,500 US dollar mark is the biggest resistance before a new all-time high above 20,000 US dollars. It is therefore important for sellers to defend this range. A breakout above $18,500 would increase the chance of a more extended rally.
Second, an overwhelming majority of Bitcoin addresses are profitable, while BTC is simultaneously testing an important resistance. According to IntoTheBlock, 99 per cent of BTC addresses are now profitable. This increases the likelihood of a decline because people are cashing out their winnings.
That BTC has recovered in the past two hours, it is very likely that declines will be bought aggressively. After the initial drop to $17,214 on Binance, Bitcoin immediately recovered to over $17,600.
Bitcoin’s hourly chart shows the 20-day moving average at $17,586. Thus, if BTC remains well above this level, the likelihood of a longer lasting recovery increases.
Dan Tapiero, co-founder of 10T Holdings, is confident about Bitcoin’s medium-term prospects. He said that the „big boys“ or smart money would probably buy these declines. He commented on the Bitcoin weekly chart:
„Not often in life do you have the opportunity to see a chart like this. Bitcoin is on the verge of overtaking the highs. 3rd wave of rises puts the 2017 rally in the shade and should last for several years. Actual fundamentals are driving the price, in contrast to the Speccy/ICO hype in 2017. Big boys will now buy the declines“.
Bitcoin weekly chart. Source: Bloomberg, Dan Tapiero
John Wick, a popular Bitcoin retailer, agreed. Wick said that Bitcoin was making some profit payouts, but it was still unclear how long the bears would be able to keep up the pressure. He said:
„Winnings payouts have started to start to happen at BTC. Let’s see how long the bears can sustain this decline before it is bought up again“.
Trader „Bitcoin Jack“ said that the dominant crypto currency is reaching the „finale“ of its short-term cycle. There is still some upside potential for Bitcoin after its recent decline, but he said that more long positions or buyers could fall into the trap. This would make a further decline likely.
The trader explained:
„I think we are in the final. There is still some upside potential to eradicate early short positions and trap even more long positions. Then the trap will close. We’re eating shawarma for dinner.“
Given that Bitcoin’s hourly moving averages remained strong after the collapse, the chances of a recovery are higher than for a larger decline.