Bitcoin (BTC), the leading cryptocurrency by market capitalization, has been trading in a sideways trend since its drop from the $28,000 level. As of the time of writing, BTC is currently valued at $26,800, having experienced significant declines across all time frames. The question on everyone’s mind now is whether this downturn will continue or if Bitcoin is headed for another crash.
Cryptocurrency enthusiasts and traders closely monitor Bitcoin’s performance after its recent price drop. According to Miles Deutscher, an experienced cryptocurrency analyst, Bitcoin typically experiences a temporary rally after a decline, followed by a new low 5-8 weeks later.
Deutscher’s analysis shows that in 2020, Bitcoin’s price dropped by 56% within 59 days after rallying initially. Similarly, in 2021, Bitcoin’s price dropped by 24% within 47 days, and in 2022, Bitcoin’s price dropped by 42% within 40 days.
With this said, with BTC trading at $26,800, if it experiences a 20% drop, its price will likely fall to $21,440, while a 30% drop would bring it down to $18,760. A 40% drop would result in a price of $16,080, potentially taking Bitcoin back to the lowest point of the 2022 bear market.
2023 Is Set To Be The Best Year For BTC Yet?
On the other hand, according to cryptocurrency analyst Adrian Zdunczyk, historical data suggests that pre-election years are the best-performing years on record for Bitcoin, with a 98.8% chance of a bull run in 2023. Even though the worst six months of the year usually begin with May, Zdunczyk believes a bullish trend will likely emerge in the coming months.
Looking at the weekly chart, Zdunczyk notes that Bitcoin is currently experiencing a complete throwback to the 200-week trend, completing the mean reversion. While a strong correlation (0.42) exists between Bitcoin and the S&P 500, the critical support near $25,000 has been defended. However, if this support level breaks, traders could see prices fall into the lower $20,000 area.
Furthermore, Zdunczyk believes more downside is possible if Bitcoin stays below $30,000. However, after a successful retest of the 200-day baseline, the support level has been confirmed by multiple techniques. Meanwhile, there has been a deterioration in the 50-day average volatility, and the long-term trend has been temporarily exhausted.
Zdunczyk’s analysis suggests a clear head and shoulders pattern has been completed, with a technical breakout target of $22,000. However, if the pattern fails to break, it could trigger a cascade rally beyond $35,000.
As seen in the chart above, the local resistance is currently at $28,000, backed by the BirbicatorPRO (BPRO) analysis. The bears maintain control until there is a powerful close above this level. Bitcoin bulls must wait for a decisive breakout above $30,000 to ensure a more reliable upward trend.
Featured image from iStock, chart from TradingView.com
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