Bitcoin price dropped dangerously close to the peak of the 2017 cycle on Wednesday. It was a brutal pullback for investors who watched their BTC wallets suffer losses after losses. Speculation has been rife in the space about what the under-$20,000 touch could mean for the market. The repercussions were plentiful but the recovery above $21,000 has spared the bears, if only for a short while.
Is Bitcoin Bottoming Inside?
After the market recovered on Wednesday, it became clear that there was some intervention in the market crash. With Bitcoin reaching the $20,000 level, many have succumbed to the fate that there will be no respite until the 2017 highs are broken. If this happens, it will be the first such event in Bitcoin history where the digital asset has always never traded below the cycle tops. previous.
Related reading | Bitcoin crash sends institutional investors running for the hills
As such, a major support formation above $20,000 has brought back some hope in the market that this might be the bottom. So far, this theory has held up as Bitcoin is back in the green for the first time since the crash began.
Even more important is the fact that the recovery was not significant by any measure. The digital asset is still well below its 20-day moving average, a sign that the bears could easily consolidate again.
BTC decline triggers fear of hitting previous cycle peak | Source: BTCUSD on TradingView.com
However, Bitcoin is said to be at oversold levels. Therefore, the market is expecting to see fatigue from the selling that has been rocking the digital assets. The slowdown will certainly be beneficial for Bitcoin, but it will need to see further recovery to ensure that.
The implications of falling below $20,000
The $20,000 level is important for Bitcoin to hold for a number of reasons. One of the most important of these loans is Bitcoin MicroStrategy backed loans. The way these loans are structured leaves open the opportunity for a margin call if BTC drops below the previous peak cycle. And although CEO Michael Saylor assured the market that the company has more collateral to put in its loan to avoid margin call disaster, it remains a very real possibility.
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The other result is the percentage liquidity levels. Now, the former is said to have paid off some of its loans which pushed the liquidation price to $14,000, but a breakout below $20,000 shows no significant support and would quickly see the lending protocol liquidate.
Last but not least, the fact that the bitcoin price at $20,000 is an important technical and psychological level. Given that the majority of open interest denominated in bitcoin is all located at the $20,000 level, a breakout below this would see a renewed sell-off by investors.
The only major support after this level is $16,000, after which it drops to $14,000, which is the percentage liquidation price. However, if Bitcoin is able to recover above $25,000 by the end of the week, a test of the $29,000 resistance point will quickly follow.
Featured image from Listverse, chart from TradingView.com
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