Bitcoin (BTC) continues to be in correction mode with BTC price dropping below $17,600 on Dec. 11, the lowest level since November.
Bitcoin in a downtrend on lower timeframes
Every beautiful rally comes to an end and gets followed by a corrective period. This correction seems to have started with the price currently down more than 10% since touching a new all-time high ten days ago.
Meanwhile, some recent news namely the proposed crypto regulation in the United States is bringing fear to the otherwise euphoric market. However, other markets have also suffered this week with equities also cooling off.
The 4-hour chart is implying a clear downtrend. Such a downward trend is confirmed by lower highs and lower lows, as shown in the chart.
First, Bitcoin’s price couldn’t break through the all-time high region, after which $18,500-18,700 acted as a strong support area for a week.
Every bounce from this region (as the arrows show) marked a weaker bounce, as lower highs were constantly formed. After three tests, the support failed, and Bitcoin’s price fell through to the next support level between $17,600-17,800.
This support zone initiated a slight bounce to $18,500-18,700. To become bullish, this zone had to flip for support, which it failed to do. This rejection confirmed the bearish support/resistance flip, after which the downtrend resumed.
Overall, the downtrend will post lower highs and lower lows always until a clear bottom is found. It doesn't seem like the market will discover it shortly, however, as higher timeframes are also eager to turn south.
Bearish divergence on the daily timeframe getting confirmed
The daily chart indicates a potential bearish divergence ready to be played out. This bearish divergence will be confirmed when the price of Bitcoin falls to break through $18,600-18,800.
In that sense, a previous resistance becomes resistance again, confirming the markets’ overall weakness and more downside becoming likely.
Based on the daily chart, the support zone is at $16,000, as Bitcoin’s price bounced strongly from that region last month. It’s the first massive support zone on the daily timeframe as well.
To become bullish in the short term, Bitcoin’s price has to reclaim the $18,600-18,800 area for support. That would invalidate the bearish divergence and any bearish outlook for the meantime.
Total market cap eyes $400 billion
The total market capitalization chart of cryptocurrencies showed a massive rally toward $600 billion. This marker was also the 1.618 Fibonacci level, which is one of the most vital Fibonacci levels.
More importantly, the total market capitalization chart showed a higher high at $600 billion. This higher high means that the market is in bull territory and will be looking for a new higher low to confirm this uptrend.
The levels to watch on the total market capitalization chart are around $470 billion and most likely the area around $400 billion. The latter is the previous resistance zone and should be watched for a potentially beautiful support/resistance flip.
More downside for BTC will not benefit altcoins. Correlations are still very high in the cryptocurrency markets, which means that altcoins will most likely suffer from any Bitcoin correction.
However, once Bitcoin finds its next bottom, altcoins will likely be well-positioned to outperform Bitcoin on shorter time frames once again.
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