Bitcoin: Buy the dip opportunity or end of the rally in 2021?
By Noemi Jansana / Alejandra Zamora
Date: Wednesday 17 Nov 2021
(Sharecast News) - The cryptocurrency market´s behaviour on Tuesday, with a correction that led the price to fall more than 10%, has provoked different reactions among investors and analysts. While some have jumped into buying, among them the Bitcoin whales, and proclaim the "healthy" correction as an opportunity to enter the market, others have gone so far as to predict the end of the rally and even mention 'crypto winter'.
The truth is that the setback is nothing more than "noise" for José María Rodríguez, technical analyst at Bolsamanía, "the umpteenth fall within a deep downtrend", he states. A normal reaction to an accumulation of negative news that has served as an excuse to drain the last excesses after a seven-week rally, from $40,000 to $69,000 on November 10th, as well as clearing the market of speculators. The cryptocurrency queen sits above $60,000 on Wednesday.
In other news, Twitter's statements that it will not buy Bitcoins, the signing of US President Joe Biden's infrastructure bill forcing crypto brokers to greater restrictions and China's increased pressure on cryptocurrency mining, are all factors that were used as catalysts for the sell-off.
"No longer is China's stance against the 'crypto' industry news, nor the corrections seen in reaction to news coming out of the Asian country. On this occasion, it hit the media that China will control that state companies do not carry out activities related to cryptocurrencies, considered illegal, and Bitcoin has reacted with a correction of almost 8%," comments Alejandro Zala, Bitpanda's Country Manager in Spain.
"The most recent example was last September 24th, when China reiterated its ban on any type of cryptocurrency transactions. On that occasion, again, Bitcoin suffered a correction of close to 8% for four days, followed by 21 days in which value rose almost 60%, reaching its historical maximum, which in any case was surpassed again just over two weeks later. We will see what happens this time," adds the analyst.
For the moment, support at $57,800 has not been tested, as the market recovered to $60,000 after reaching $58,500. Contributing to Tuesday's short-term rebound, were important figures in the market. Specifically, the third largest Bitcoin management increased its holdings by 207 Bitcoins, reports 'CoinTelegraph'. This type of whale behavior is common in bullish cycles.
However, technical indicators suggest that Bitcoin is not out of the woods yet, as a fall towards $57,000 is still possible. "A break of this level may point to a deeper downturn, with attention perhaps shifting back towards the $50,000 region, but as ever with Bitcoin, that is never clear," remarks Craig Erlam, analyst at Onda.
"The extreme volatility that the market is prone to could lead to a potential domino effect if more negative news were to emerge and take prices to new lows," comment XTB experts.
That said, they point out that "while these factors may frighten some investors and newcomers to the market, some experienced traders will have seen similar sized corrections in the past and could potentially be eyeing opportunities as mainstream adoption of cryptocurrencies and NFT's continue to move further."
However, "it looks like Bitcoin bulls are losing power and are likely to put up a fight, especially if the price breaks below the 50-day simple moving average (SMA) on the daily time frame," comments Naeem Aslam, analyst at Ava Trade, adding, "Bitcoin was due for a correction according to the RSI indicator, and that correction has finally arrived."
From a technical point of view, "if the price stays above the 50-day SMA, we could see another substantial rally in Bitcoin," the expert continues.
Aslam also notes that "the biggest fear among crypto traders is whether crypto winter is here." "No one wants to see another crypto winter, as it is hard to forget the dire consequences of the previous one." "On the other hand, what traders have been waiting for is a strong rally, especially given the fact that during this time of year, we usually see a strong rally for cryptocurrencies - of course, with the exception of crypto winter," the expert concludes.
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