On Wednesday, bitcoin’s value had plunged dangerously close at the 2017 peak. This was an awful drop for bitcoin investors, who saw their BTC portfolios lose after loss. The speculations about the impact of a little below $20,000 on the market were widespread. While the consequences were severe, however the rebound above $21,000 has held off bears for a while.
What is the Bottom of Bitcoin?
It has now become clear that the intervention was involved in Wednesday’s market recovery. Many people had given up on the possibility of bitcoin reaching $20,000 and that it would not recover until 2017’s highs. It would have represented a unique event in bitcoin’s history where digital assets had never been below their previous peak levels.
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This has given some hope that the market will recover from the crash by forming significant support right above $20,000 As bitcoin turned green again for the first times since the crash, the theory appears to be valid.
Even more significant is that there has been no sign of a substantial recovery. This digital asset is well below its 20 day moving average. It’s a warning sign that bears may easily take over.
BTC drop triggers fears of hitting the previous cycle peak| Source: BTCUSD on TradingView.com
Bitcoin is believed to be trading at an oversold level. The market is expecting to feel tired from the recent sell-offs of bitcoin. Bitcoin would benefit from a slowdown, but this would require more recovery.
Impacts of falling below $20,000
For a variety of reasons, bitcoin is essential to have at $20,000 for its security. The MicroStrategy loans that are bitcoin-backed by microcredits is one of the biggest. These loans have a potential margin call opportunity in the event that BTC falls below its peak. Although CEO Michael Saylor assured that there is more collateral available to the loan, this possibility remains.
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The Celsius liquidity levels are another implication. Now the first appears to have paid off its loans, pushing its liquidation value back to $14,000. However, any break below $20,000 does not show significant support. This would result in the loan protocol being quickly liquidated.
The fact that bitcoin is $20,000 at the moment represents an important psychological and technical level. BTC open interest is overwhelmingly at $20,000, so investors would be tempted to sell off if it drops below that level.
Only support is found at $16,000 after that, and then it drops to $14,000 (the Celsius liquidation cost). But, bitcoin could quickly test the $29,000 resistance level if it is able recover to above $25,000 by week’s end.
Featured image taken from Listverse. Chart from TradingView.com
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