The price of Bitcoin (BTC) plummeted dramatically on Feb. 22 to fall below $48,000, a rare trend reversal following the recent bull run. The major market correction occurred just before the US financial markets opened, creating confusion as to where the price of the leading cryptocurrency was headed.
Correction could initiate bearish run
Bitcoin has been performing very well since the turn of the year, breaking multiple all-time-high (ATH) prices over the past couple of months. This culminated in its highest price of $58,000 last week. However, in the past 24 hours, the asset’s price dropped by more than $10,000 to under $48,000, representing close to 20% correction from its ATH.
The timing of the pullback was expected by many crypto insiders as a huge volume of 28,000 BTC was deposited on the Gemini exchange. Such sudden increase in supply was bound to have an adverse effect on the cryptocurrency’s price as it tips the market dynamics to the buyers’ favour.
Other cryptocurrencies were not spared by the price decline as altcoins value fell alongside that of bitcoin. Interestingly, the bitcoin market capitalisation fell below the newly acquire $1 trillion level but its market dominance rose as altcoins shed more value than the leading crypto itself.
The decline has, however, been reversed with Bitcoin trading at above $53,700 at the time of this writing. This recent upward movement has for the moment brought some calm to the market and alleviated fears that the digital asset was set to enter bear territory.
March has a record for bear markets
In the crypto market, March is not historically a bullish month as bitcoin has underwent massive corrections in 2017, 2018 and 2020 while it traded sideways in 2016 and 2019.
Even though there is no guarantee that history might repeat itself, it sure does rhyme. An observation that is supported by historical data, providing evidence on how the crypto market cycles operate.
At the moment, the 21-week moving average is the critical indicator to watch, and concerns should only arise if bitcoin’s price falls below this level. With the prevailing market conditions, this level stands at $28,000 and is expected to rise to $32,000 and $34,000 over the coming weeks.
Considering this, it is therefore safe to say that even a further drop below $40,000, although highly unlikely, should not be a major cause of concern. It would be representative of a 30% to 40% correction, that is quite common and acceptable in the crypto market.
On the upside, if bitcoin makes a full recovery from this temporary pull back and finds support above $44,000 then it could likely rebound to set a new ATH, upwards of $60,000.
Image courtesy of Flickr