Bitcoin Price Facing Strong Resistance at $4,200
Writing in a note to clients on Monday, BitOoda Executive VP of Institutional Sales Brian Donovan said that the sell-off demonstrated that the ~$4,200 level had become a significant level of resistance for the bitcoin price.
The bitcoin price rally stalled just below resistance at $4,200. | Source: BitOoda
“We can see clearly now that the ~$4,200 BTC level has formed RESISTANCE, and until that level gets broken to the upside, we will remain BEARISH of the crypto space.”
On Sunday, a buoyant bitcoin made a strong run at $4,200 but ran headfirst into that resistance line, stalling at $4,190 on Bitstamp and $4,188 on Coinbase.
Notably, Donovan wrote that the rapid drop was likely caused by traders who were net-long on bitcoin “liquidating their inventory, with the market not easily absorbing their selling pressure. As evidence, he noted that short interest has been in decline throughout most of the year and did not increase over the weekend.
Longs, not shorts, initiated the weekend crypto crash. | Source: BitOoda
Bitcoin Needs to Put Key $6,000 Level in its Rearview Mirror
Zooming out, BitOoda intimated that traders and analysts who have rushed to call a bottom had jumped the gun, as the “thinly-traded” cryptocurrency market is vulnerable to severe price swings and could still go below $3,000 for the first time since 2017.
From another recent client note that came toward the beginning of the crypto market’s February rally:
“The current market is rather late in the selloff stage. We are more than 80% off the highs. While we are still in the bear market, any price correction can be significant. Our downside target is in the $2400-$2800 range. A short covering rally may easily take BTC to $4030-$4300 cluster of previous highs or even to $5600-$6000 support level that has become resistance. If the market exits a bear stage just a 33% retracement of the selloff would take BTC to $8700.”
As CCN reported, BitOoda currently maintains a downside target of $2,400 to $2,800, a forecast partially influenced by lessons from the 2011 silver price bubble.
The firm is sticking by that outlook even after the recent upswing, and Donovan says that he is eyeing $6,000 as the crucial level that the bitcoin price must cross to prove that it has finally exited its longest-ever bear market.
Until then, bull market calls are nothing short of premature.
Featured Image from Shutterstock. Price Charts from TradingView.