Bitcoin (BTC) experienced a significant drop below the $50,000 level on August 5, following the crash in the Japanese stock market. According to Coinglass data, there were $1.08 billion in liquidations in leveraged positions and collateral trades. Traders are now wondering if the correction will deepen or if a relief rally is on the horizon. Rekt Capital, a popular analyst, believes that Bitcoin’s downside deviation could persist for around two months.
Some analysts are predicting that the correction could further deepen. Alex Kuptsikevich, a senior market analyst at FXPro, stated that Bitcoin’s selling could potentially push it down to $42,000.
Bitcoin has broken down from its previous range, but it is not uncommon for the first break to be a fake move. Markets often quickly reverse direction, catching traders off guard. If this occurs, there may be a short squeeze in the coming days.
To determine the important resistance levels that bulls need to conquer in order to trap the bears, let’s analyze the charts.
S&P 500 Index:
The S&P 500 Index fell below the 50-day simple moving average (5,448) on August 2, indicating a change in the short-term trend. The index experienced a sharp gap down on August 5, but lower levels are attracting buyers. If the price rises and remains above 5,265, the index could rally to the moving averages, which will be a crucial resistance level to watch out for. However, if the price turns down from the moving averages, it will signal bearish sentiment and that rallies are being sold into. In that case, the bears will try to push the price down to the psychological level of 5,000.
US Dollar Index:
The US Dollar Index (DXY) turned down from the 20-day exponential moving average (104.22) on August 2 and fell below the channel’s support line. The index is currently seeking support at 102.35. Buyers will attempt to push the price to the channel’s breakdown level. If the price turns down from this level, it will indicate that the bears have turned the level into resistance, increasing the likelihood of a drop to 102 and then 101. To prevent further downside, buyers will need to push and sustain the price above the 20-day EMA.
Bitcoin:
Bitcoin’s sideways price action has resulted in a downside break below the solid support level of $55,724, indicating that traders are rushing to exit. However, the long tail on the candlestick suggests that bears are struggling to maintain lower levels, indicating a drying up of selling pressure. Bulls will attempt a comeback by pushing the price back above $55,724. If they succeed, it will signal a rejection of the breakdown and may result in a short squeeze, pushing the BTC/USDT pair to the moving averages. On the other hand, if bears maintain control, they will fiercely defend the $55,724 level, potentially causing the pair to slide towards the vital support levels at $49,000 and eventually $42,000.
Ether:
Ether (ETH) experienced a nosedive below the $2,850 support on August 4, completing a descending triangle pattern. The selling pressure increased on August 5, pulling the price towards the psychological support level at $2,000. However, the long tail on the candlestick and oversold levels on the RSI suggest a relief rally is likely in the near term. The ETH/USDT pair could reach the breakdown level of $2,850. Failure to reach this level may indicate a lack of aggressive buying by the bulls, increasing the possibility of a break below $2,000.
BNB:
BNB’s range-bound action between $495 and $635 broke to the downside on August 5, indicating that bears are attempting to take control. However, aggressive buying near $400 is evident from the long tail on the candlestick, and oversold levels on the RSI suggest that selling may have been overdone in the short term. A relief rally could be on the horizon. The BNB/USDT pair will aim to rise back above the breakdown level of $495, which would signal a rejection of the breakdown. However, if the price turns down sharply from $460, it would suggest that bears have turned the level into resistance. In that case, the pair may sink to $400 and subsequently $350.
Solana:
Solana (SOL) has been oscillating between $116 and $210 for several months, indicating a pattern of buying on dips and selling on rallies. The recent rebound off the solid support at $116 suggests that bulls are active at lower levels. The SOL/USDT pair could reach the moving averages, which will serve as a key resistance level. If the price turns down from the moving averages, bears will attempt to sink the pair below $116, potentially causing a fall to $100 and then $80. On the upside, a close above the moving averages would suggest a reduction in selling pressure, and the pair may continue to trade within the large range for a few more days.
XRP:
XRP fell below the 50-day SMA ($0.52) on August 5, indicating that the price may remain within the large range between $0.41 and $0.64 for some time. Traders typically buy dips near the support and sell close to the resistance in a large range. Bulls are likely to defend the $0.46 to $0.41 zone strongly, as a break below it could lead to a fall to $0.35 and then $0.30. On the upside, a break and close above the 50-day SMA would suggest that the range-bound action may continue, and the XRP/USDT pair could climb towards the resistance at $0.64.
Dogecoin:
Dogecoin plummeted below the psychological support level of $0.10 on August 5, indicating that bears are in control. However, the price rebounded from the $0.08 support, signaling that bulls are trying to halt the decline. The DOGE/USDT pair may rise to $0.10 and then to the moving averages, and a sharp rebound would suggest that the downtrend may be over, leading to a period of base building and range trading. On the other hand, if the price turns down from $0.10, it will indicate a lack of buyers and increase the risk of a fall to $0.06.
Toncoin:
Toncoin completed a double top pattern when it fell below $6.77 on July 25. The failure of bulls to push and maintain the price above $6.77 intensified selling on August 2. The TON/USDT pair reached the crucial support at $4.72 on August 5, which is expected to act as solid support. Buyers have initiated a relief rally, which could reach $5.50 and then $6.36. The oversold level on the RSI also suggests a possible bounce in the near term. However, if the price turns down from the overhead resistance and breaks below $4.72, it could lead to intensified selling and a potential drop to the next support near $3.50.
Cardano:
Cardano fell below the crucial support level at $0.32 on August 5, but the long tail on the candlestick indicates that lower levels attracted buying. The sharp selling pressure in recent days has pushed the RSI into the oversold zone, suggesting a relief rally may be on the horizon. The recovery could reach the moving averages, where sellers are likely to step in. If the price turns down sharply from the moving averages, the ADA/USDT pair could drop to the $0.24 support. Buyers will need to drive and maintain the pair above the downtrend line to signal a potential change in trend.
Please note that this article does not provide investment advice or recommendations. Readers should conduct their own research before making any investment decisions.