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Bitcoin has hit a crucial level in its attempts to recover from its recent drop to $30,000
How Bitcoin reacts in the $40,500-$41,500 will help dictate its medium term health
Sentiment around Bitcoin is inconsistent
Bitcoin’s rebound from its recent crash to $30,000 has now seen it reach a critical level. At the time of writing, the recent push has seen it hit $40,800, which is bang in the middle of an area of crucial resistance. We look at the possible scenarios that could play out depending how Bitcoin handles this key zone.
Bitcoin Bulls Looking to Clear $41,500
When Bitcoin first hit this current level in January it was most definitely in the ascendancy. It retraced back to $30,000 which it used as support before the run to $65,000. This $30,000 level held as support as Bitcoin reversed 53%, giving Bitcoin a potential platform for further gains. Whether it can do so however is another matter.
What happens at this current level is crucial to Bitcoin’s medium-term health. There are two distinct possibilities that could play out depending how it behaves. The bullish argument says that we break through the resistance range, turn it into support, and continue with the bull run:
Doing so would give us a concrete higher high and higher low on a higher timeframe, which is a great sign of recovery. We would then look for Bitcoin to continue this trend, which would in turn bring alts up with it.
Bears Eyeing Shorts Down to $20,000
The bearish argument says that we reject at the resistance and fall back down again:
Retesting the $30,000 support would not be a healthy move, likely resulting in Bitcoin breaking down through it and heading further down towards the prior all time high of $20,000. This would signal a huge loss of faith in Bitcoin and would probably usher in a bear market, or at least a lengthy period of consolidation, with alts reversing massively once again.
The Lone Ranger?
There is a third option, and one that would be the best as far as alts are concerned. If Bitcoin were to reject here but find support once more at $30,000 we could see a period of consolidation and ranging between $30,000 and $40,500 as Bitcoin gathers momentum before a further run up later in the year:
This would be similar to what we saw in 2013 and would allow alts to enjoy a healthy summer, gaining in dollar and BTC value.
With the sentiment around Bitcoin changing faster than a supermodel at a fashion show, we simply don’t know if Bitcoin has the chops to continue its bull market or if the run it had enjoyed until April has exhausted it. What’s clear however is that the $40,500-$41,500 range will go a long way to dictating that.