Some analysts say that the price of Bitcoin (BTC) could drop to $27,000 in a bearish scenario if it falls through the $30,000 support area.
The potential drop to $27,000 is conditional in that BTC would have to break down below $30,500, where it strongly bounced from on Jan. 11.
Which is the short-term Bitcoin bottom?
In the foreseeable future, there are three key technical levels at play for Bitcoin: $34,500, $30,500, and $27,000.
$34,500 has been acting as a critical support area throughout the past 72 hours. Each time BTC dropped to this level, it recovered fairly quickly to around $36,300.
If $34,500 breaks, the next major support level is $30,500. This is where Bitcoin recovered from in the big correction on Jan. 11, when $2 billion worth of futures contracts were liquidated.
A pseudonymous trader known as “Alex,” for example, said that if Bitcoin heads back down to $30,000 with no visible buyer reaction, the trade would be to wait for $27,000 or a move back up above $30,000. He said:
“Decision making is dynamic. Nothing is set in stone. But most likely if price heads back down to 30K 'll be holding off next time. The gameplan is to have ammo to buy the dip (to redeploy). If 30K breaks absolutely no buying until down to 27Ks or back above 30K.”
Similarly, another popular pseudonymous trader known as “Mayne” said that losing $33,000 would likely result in $27,000. Prior to the weekly candle open on Jan. 18, the trader wrote:
“I think we hold here ($33,000) and get a solid bounce going into Monday. If we lose this level, Bitcoin is actually a scam and I denounce any association I ever had with it until $27k.”
What happens to altcoins if $30,000 breaks?
Alex emphasized that altcoins would likely get “obliterated” with 30% to 50% corrections if Bitcoin falls back down to $27,000.
Altcoins are typically less liquid and have a much lower volume than Bitcoin. Hence, during a bear cycle, altcoins often see steeper pullbacks compared to BTC. The trader explained:
“If for whatever reason $BTC falls to 27K, expect alts to get obliterated with 35%-50% intraday pullbacks. So in that scenario, buying alts will be better than buying $BTC. Definitively better buying alts there than buying $BTC on leverage. Identify the winners, and jump in.”
So far, Bitcoin is slowly recovering from the $34,500 support level, which is a positive trend. It also marks a whale cluster support level, meaning that whales are likely to protect that level with buy orders.
The presence of whale clusters at $34,500 explains why Bitcoin has been seeing strong bounces in that area in the last 48 hours. In the near term, the key to a convincing recovery would be protecting this level.