After Bitcoin’s (BTC) capitulation on May 19 and the pullback on May 20, the next big question on everyone's mind is whether the correction is over or will the downtrend resume. Let’s study the supply and demand picture to gain more insight.
Chainalysis chief economist Philip Gradwell pointed out that whales who had purchased more than 1,000 Bitcoin after 2017 added 34,000 Bitcoin to their holdings on May 18 and 19. This suggests the whales bought during the crypto meltdown.
Additional on-chain data also suggests that the huge spike in over-the-counter Bitcoin outflow is a signal of accumulation by institutions or high net worth individuals.
Although institutional investors may be buying, Ethereum founder Vitalik Buterin said in an interview with CNN on May 18 that the crypto sector was in a bubble. Being non-committal, Buterin said that the bubble may have already burst or could do so after a few months.
Guggenheim CIO Scott Minerd who till recently was projecting a $600,000 target on Bitcoin, did a ‘U turn’ on his opinion and termed crypto as “Tulipmania.” This shows how some newer crypto investors flip their views on every minor dip.
The market participants seem to be divided on the next possible move. Let’s analyze the charts of the top-10 cryptocurrencies to determine the path of least resistance.
Bitcoin’s long tail on the May 19 candlestick suggests the bulls aggressively bought the drop to $29,257.95. The buyers continued their purchases on May 20 but the price has reversed direction from $42,217.17 today.
The downsloping 20-day exponential moving average ($47,964) and the relative strength index (RSI) near the oversold territory suggest the bears are in command. Even if the price rises above $42,500, the BTC/USDT pair is likely to face resistance at the neckline and then at the 20-day EMA.
If the price breaks below $35,000, the pair could drop to $28,850. A strong rebound off this support will suggest accumulation at lower levels and may result in a consolidation. A breakout and close above $51,538 will signal advantage to the bulls while a break below $28,850 may start the next leg of the down move that could reach $20,000.
Ether’s (ETH) rebound off the $1,801.60 level on May 19 is facing stiff resistance at the 50-day simple moving average ($2,779). This suggests that bears are trying to flip the 50-day SMA into resistance.
The 20-day EMA ($3,201) has turned down and the RSI has dropped below 40, indicating that bears have the upper hand. If the sellers can sink the price below $2,145, the ETH/USDT pair could drop to $1,801.60. A break below this support may pull the price down to $1,547.46 and then $1,289.
Contrary to this assumption, if the price turns up and breaks above $3,000, the bulls may challenge the 20-day EMA. A breakout and close above $3,450 will suggest the downtrend has ended.
Binance Coin’s (BNB) pullback from the $280 low on May 19 has hit a wall at $428. This suggests the selling may not be over yet and the bears will make one more attempt to resume the downtrend.
The bearish crossover on the moving averages and the RSI in the negative territory suggest the bears are in control. If the bears sustain the price below $348.70, the BNB/USDT pair could again drop to $280. A break below this support could aggravate selling and pull the price down to $233.81.
Contrary to this assumption, if the price turns up from the current level and rises above $348.70, it will indicate that traders are not waiting for a deep correction to buy. That will increase the possibility of a break above $428. If that happens, the pair may rally to $480 where the bears are again likely to mount a stiff resistance.
Cardano’s (ADA) long tail on the May 19 candlestick shows the bulls aggressively purchased the drop to $0.95. The buyers continued the recovery on May 20 and pushed the price above the 20-day EMA ($1.71), indicating strength.
However, the bears have not given up yet. They are again trying to sink the price below the $1.48 support. If the price rebounds off this support, the ADA/USDT pair may consolidate between $1.48 and $1.94 for a few days.
The flat 20-day EMA and the RSI near the midpoint suggest a balance between supply and demand. This balance will tilt in favor of the bears if the price breaks and closes below the 50-day SMA ($1.44). Such a move could open the gates for a drop to $1.
On the other hand, if the buyers drive the price above $1.94, it will suggest the correction is over. The pair could then retest the all-time high at $2.34.
Dogecoin (DOGE) rebounded off the $0.21 support on May 19 and the bulls managed to sustain the price above the 50-day SMA ($0.31). They again successfully defended the 50-day SMA on May 20.
If buyers propel the price above the downtrend line, the DOGE/USDT pair could rally to $0.47. If the price turns down from this resistance, the pair may remain range-bound between $0.47 and $0.30 for a few days.
The 20-day EMA ($0.44) has started to slope down marginally and the RSI is just below the midpoint, indicating a minor advantage to the bears.
A break and close below $0.30 could result in a drop to $0.21. Conversely, a breakout and close above $0.47 could open the doors for a move to $0.57.
The bulls managed to defend the $0.88 level for the past two days, indicating demand at lower levels. However, if the bulls do not push the price above the moving averages quickly, XRP could once again slide down to $0.88.
A breakdown and close below this support will suggest that supply exceeds demand. That may extend the downtrend to the next support at $0.56. The moving averages on the verge of a bearish crossover and the RSI is in the negative zone, suggesting the bears are in control.
Alternatively, if the price rebounds off $0.88, the XRP/USDT pair may rise to $1.26 and consolidate between these two levels for the next few days. The bulls will have to push and close the price above $1.70 to gain the upper hand.
Polkadot (DOT) closed below the $26.50 to $44 range on May 19 but the bulls managed to push the price back into the range on May 20. However, the bulls have failed to sustain the price above $26.50, indicating selling on rallies.
If the bears sink the DOT/USDT pair below $21.20, a retest of $18 will be on the cards. A breakdown and close below this critical support could indicate the start of a new downtrend. The 20-day EMA ($36) has turned down and the RSI is in the negative territory, suggesting the bears are in the driver’s seat.
This negative view will invalidate if the bulls push the price back above $26.50. Such a move will suggest strong buying on dips. A breakout and close above $31.28 may start the pair’s journey toward the 20-day EMA. That will enhance the prospects of the pair remaining inside the range for a few more days.
The relief rally in Bitcoin Cash (BCH) could not even reach the 38.2% Fibonacci retracement level at $918.58, which suggests that demand dries up at higher levels.
The downsloping 20-day EMA ($1,054) and the RSI in the negative territory indicate advantage to the bears. If the price breaks below $686.75, the BCH/USDT pair could retest the panic low at $473.84. A break below the $473.84 to $442.96 support zone could pull the price down to $370.
On the contrary, if the pair turns up from the current level or from $473.83, it will suggest accumulation at lower levels. A breakout and close above the $940 resistance will be the first indication of strength. The negative view will invalidate if the bulls push the price above the 20-day EMA.
Litecoin’s (LTC) pullback is facing stiff resistance near the support line of the wedge. This suggests the bears are attempting to flip this level into resistance. If they succeed, the altcoin may resume its downtrend.
If the bears sink the price below $166.56, the LTC/USDT pair could drop to $143.57. A strong rebound off this level may lead to a few days of consolidation with the boundaries at $143.57 and $224.85.
If the bulls push and sustain the price above $224.85, the pair may rally to the 20-day EMA ($277), which is likely to act as stiff resistance. If the price turns down from this level, the pair may drop to the support line of the wedge. A strong rebound off this support will be the first indication that the downtrend may be over.
Uniswap’s (UNI) recovery on May 20 hit a wall just above the 38.2% Fibonacci retracement level at $27.07. The altcoin has turned down today as the bears try to cement their advantage
The moving averages have completed a bearish crossover and the RSI is near the oversold territory, which suggests the bears have the upper hand.
A close below $22.50 will be the first sign of weakness and that may result in a retest of the $17.50 to $16 support zone. A strong bounce off this zone will indicate buying at lower levels and could be followed by a few days of range-bound action.
Conversely, if the price turns up from the current level and breaks above $27.07, the UNI/USDT pair could rally to the 20-day EMA ($33.82).
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Market data is provided by HitBTC exchange.