By CCN: Josh Rager, a cryptocurrency trader and technical analyst, expects a healthy pullback for bitcoin based on the historical performance of the asset in the past three years.
Since 2016, the bitcoin price has tended to correct by 30 to 40 percent following a strong short-term rally.
Although the historical performance of the bitcoin price is no guarantee of its future trend, coming off of a staggering 100 percent year-to-date gain, despite the strong momentum of the asset, some analysts have suggested the possibility of a large correction.
Is a 30 Percent Drop For Bitcoin Possible?
Like any other asset, bitcoin can become vulnerable to a minor correction if it surges by a large margin in a short time frame in a parabolic rally.
Apart from one occasion in the past week during which bitcoin experienced an abrupt drop to $6,400, the dominant cryptocurrency has more or less recovered without a large downside movement or a correction in the past month.
Since April 22, the bitcoin price has increased from $5,300 to $8,000, by nearly $2,700 within 30 days.
As such, several traders are anticipating a minor correction to occur given that the bitcoin price has surged without a dip in momentum.
Rager said:
BTC 30%+ pullback coming? Yes, eventually. If history repeats, there should be plenty of strong pullbacks on the way to next peak all-time high. There were at least nine 30%+ pullbacks from last cycle accumulation and uptrend Plenty of buying opportunities ahead, don’t let it shake you.
But, other traders have suggested the possibility of the momentum of the crypto market reducing the probability of a large correction in the near-term.
A cryptocurrency trader known to the community as Mayne said that if the bitcoin price remains above a key support level at high $7,000, an increase to $9,000 is a likely target. Similarly, if ethereum remains above $260, the trader said that $300 remains a possible target.
While it is entirely possible for bitcoin and the rest of the crypto market to demonstrate extreme volatility in the weeks to come, some have suggested that the current momentum of the market could sustain the positive trend of major crypto assets.
“BTC – Need to hold $7,884 and red OB for upside target $9,000+. Break below red OB I expect $7,300 and maybe lower to $6,400. ETH – USD pair needs to break and close thru $260 to get to $300. BTC pair had a nice reaction of range low if we can hold EQ and flip grey OB looks good,” he said.
$BTC levels
Support: 7600, 7200, 6800, 6400, 6200, 6000, 5750-5500, 5000.
Resistance: 8400-8500, 10000, 11500-11750, 13000, 15000, 17400, 20000, moon.
— Alex Krüger (@krugermacro) May 21, 2019
Traders are closely observing the $7,800 to $8,400 range as a break out above $8,400, which has remained a key resistance level for the asset, could initiate another vertical price movement in the near-term.
Momentum is Key
As explained by BKCM Capital CEO Brian Kelly on CNBC Fast Money, if the bitcoin halving in May 2020 is triggering the current rally of bitcoin, there could be more fuel left for the market.
Kelly said:
“The big picture here is we’re starting to enter this cycle where you get a supply cut. Every four years the supply of bitcoin gets cut in half, you generally have a rally a year into it and a year out of it, and so we’re just at the beginning of that stage.”
“You got this combination of a lot of demand coming in and we are heading into a period where we are going to have a supply cut and that’s generally very bullish.”
In the near-term, momentum will be crucial for the crypto market and the daily volume of bitcoin would have to supplement the price trend of the asset.
