Bitcoin (BTC) is attempting to reclaim a crucial level as support after bouncing from the recent drop below $115,000. Nonetheless, some analysts warned that the cryptocurrency is entering a corrective phase with a potential 15%-25% drop.
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Bitcoin Risks Drop Below $110,000
On Monday, Bitcoin fell below the $115,000 level for the first time in nearly two weeks, retesting the $114,500 support before bouncing. The flagship crypto has been hovering between its local price range since August 7, hitting its latest all-time high (ATH) of $124,200 before ultimately being rejected from the range highs.
Now, some market watchers have affirmed that BTC has entered a corrective phase, which could send the cryptocurrency below other crucial support levels. Ali Martinez noted that the recent rejection “came in the form of a deviation, which often signals weakness and opens the door for deeper pullbacks.”
According to the analyst, Bitcoin has been trading within the $112,000-$122,000 price range, suggesting that the local bottom is the next key support level to watch as momentum leans bearish.
Notably, the cryptocurrency immediately bounced from today’s drop, reclaiming the recently lost $116,500 breakout level, and nearing the $117,000 area again. To the analyst, a confirmed rebound could reset bullish momentum, sending the price to the range highs.
However, if BTC’s price drops again and the $112,000 support doesn’t hold, the cryptocurrency risks triggering a $4,000 drop to the $108,000 area. Martinez highlighted that on-chain data shows a liquidity grab between these two levels.
Additionally, the Accumulation Trend Score, which dropped to 0.20, signals that holders are “redistributing their Bitcoin rather than accumulating at these levels.”
Has The Price Discovery Correction Begun?
Analyst Rekt Capital pointed out that BTC failed to hold the crucial $119,000 level as support on the weekly chart, closing on Sunday below its weekly bull flag pattern that had been developing since early July.
According to a previous analysis, turning the pattern’s bottom into resistance would be a bearish retest that would confirm the breakdown from the pattern, and potentially lead to a new retest of the $112,000 area.
Amid its recent performance, he asserted that Bitcoin has entered its second Price Discovery Correction, which has historically followed the second Price Discovery Uptrend peak, between weeks 5-7.
“Interestingly, the upside wick that formed last week developed right at the finish line in Week 6 before pulling back. This upside wick was crucial because it came to save the historical cyclicality that we tend to see in price action across cycles,” the analyst explained, as the previous ATH formed in Week 2 of the second uptrend.
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Rekt Capital suggested that Bitcoin could be transitioning into a corrective period. Nonetheless, he noted that this corrective might not last as long as previous corrections, as at this moment of the 2017 and 2021 cycles, BTC pullbacks lasted between 1-3 weeks and were 25% and 29% deep, respectively.
“In both cases, these pullbacks were shorter and shallower by the standards of the previous corrections in the respective cycles,” he detailed, concluding that BTC must “ideally resolve this pullback over the next handful of weeks and perform a relatively shallow pullback of -15% to -25%.”
Featured Image from Unsplash.com, Chart from TradingView.com
