What you need to know
- Bitcoin surged to a record high above $109,000 ahead of Donald Trump's inauguration Monday but pared its gains as the new U.S. president made no mention of cryptocurrency during his inaugural address or other appearances after taking office.
- Over the weekend, two bearish candlestick patterns formed on the cryptocurrency's chart that warn of a potential move lower.
- Investors should watch key support levels on Bitcoin's chart around $92,000, $87,000, and $74,000, while also monitoring important overhead areas near $106,000 and $120,000.
Bitcoin (BTCUSD), a cryptocurrency that has seen a recent record rise, set another high on the day of Donald Trump’s inauguration. However, the gains were wiped out when Trump, a staunch supporter and advocate of the crypto market, failed to mention the currency in either his inaugural address, or during any of his other official appearances.
Bitcoin is up nearly 50% in the last few months since the election of early November amid hopes that Trump’s administration will reduce regulatory barriers, create a bitcoin reserves and promote other initiatives to encourage the adoption of digital currencies.
Recently, Bitcoin traded at $102,800. It had risen as high as $109 300 in the early hours of Monday.
The bearish candlestick pattern signals caution
Bitcoin’s price, which had reached an all-time record high today, began to retreat and form a “shooting star” candlestick pattern, signaling a potential reverse. In addition, this shooting star pattern followed an engulfing bearish candlestick over the weekend. This is another pattern which warns about a possible move downward.
In other signs of waning market momentum, while today’s price peak reached a higher top, the relative Strength Index (RSI), created a more shallow high. A bearish divergence was formed between the price chart and the indicator.
We’ll identify the three levels that could be key support for Bitcoin during a retracement. But we’ll also examine important overheads areas which may become relevant if Bitcoin’s price moves higher.
The Key Support Levels To Watch
Around $92,000 is the first important lower level. The area may find support at the peak of early November, which is closely aligned with the pullback troughs formed between late December and early January.
Investors could find buying opportunities at the bottom of the pennant pattern, which preceded the rise of the cryptocurrency in the first part of December.
Bitcoin bulls failing to defend this price level could lead to a significant fall to about $74,000. Those who prefer buy-and hold strategies can look for entry points near the multi-month line connecting the peaks of March 2024 and October 2020 with the 200-day rising moving average.
Keep an eye on the Important Areas Overhead
Investors will want to watch the $106,000 region if Bitcoin rises from this point. The cryptocurrency has struggled to stage a decisive close above this number since posting its record closing high in mid-December.
It’s also worth keeping an eye on the area around $120,000. The area may be a good place to find selling pressure. It is near the measured move target, which calculates how much the recent trading range of the crypto currency has been and then adds this amount to the breakout. As an example, we can add $14,000 on top of $106,000 to get $120,000.
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