The price of Bitcoin (BTC) has been consolidating above $17,000 on Nov. 28 following a major correction from $19,400. In the near term, traders anticipate the dominant cryptocurrency to see another steep pullback.
There are three main reasons why traders expect a deeper drop to occur in the near future, namely, historical cycles, the Fibonacci Sequence, and the record-high open interest of the futures market.
Historical cycles hint at deeper BTC correction
BTC price frequently saw 20% to 30% drops in past bull markets like the rally to nearly $20,000 in 2017. Although the rally continued afterward, major corrections occurred as the derivatives market became overcrowded.
Several traders now say that the price of Bitcoin should correct to the $13,800-$14,500 range if a similar pattern occurs.
In addition, some technical analysts are considering a worst-case scenario where BTC falls to the top of the August 2020 rally. That would put the price of Bitcoin at around $12,468.
A pseudonymous trader known as “Salsa Tekila” said that the technical outlook of Bitcoin is relatively straightforward.
If BTC rises above $17,500 and stays above it, the trend becomes bullish once again. But, if BTC stays below $17,500, a drop to the $11,000 to $13,000 range should not be unexpected. The trader wrote:
“My $BTC outlook: 1) Bearish below $17'500 area. 2) Bullish if we break $17'500, in which case buy dips. 3) $18.7k area = only big resistance before ATH (IF, MAYBE). Could see [$11-$13k]. Wouldn't hold net short past ≈$14.5k.”
The Fibonacci sequence
As Cointelegraph previously reported, traders are pinpointing the 0.618 level using the Fibonacci sequence as a potential area of interest for buyers.
The Fibonacci sequence encompassing Bitcoin’s entire rally until $19,400 puts the 0.618 level at around $13,500. Under the sequence, 0.618 is considered a pivotal level for a potential trend reversal.
The futures market’s open interest remains high
When the open interest of the Bitcoin futures market remains above $1 billion, the price of BTC tends to drop.
Earlier today, Cointelegraph reported that throughout BTC’s history, its price often corrected when the futures market saw a heightened level of trading activity.
According to data from Skew, the open interest across major futures exchanges currently exceeds $1 billion. OKEx, Binance Futures, and CME, the three largest BTC futures markets, have now reached an all-time high open interest of $1.4 billion, $0.94 billion, and $0.93 billion, respectively.
Other traders, however, believe that Bitcoin could either rally to $18,000 before any pullback or even see a continuation of the general uptrend to new highs.
Michael van de Poppe, a full-time trader at the Amsterdam Stock Exchange, said earlier today that the range low for BTC price is currently holding, which is above $16,000.
This may result in a relief rally to $18,000. Whale clusters also show that the $16,000 area remains a strong support level.
Send it to 18k. pic.twitter.com/vsRtaFfDew— il Capo Of Crypto (@CryptoCapo_) November 28, 2020
Similarly, a pseudonymous trader known as “Crypto Capo” said that based on previous fractals, BTC could first see $18,000 before another major drop.