The Bitcoin price initiated a rapid decrease on November 22. It fell through several support areas without showing any signs of a reversal. It is approaching a very significant support line, which has been in place for roughly eight years.
It is possible that this decrease was caused by the negative news ensuing from China, who has announced more regulations amidst a crypto crackdown. The announcement also reaffirms the stance of the government on promoting blockchain, but not cryptocurrency. More specifically, it reaffirmed the conviction that initial coin offerings are illegal, and tightened regulation on foreign exchanges.
Cryptocurrency trader @CryptoWelson stated that we are entering the $6000 support area which can initiate a reversal.
Will this area actually reverse the price or will we decrease below? Let’s take a closer look and decide.
Bitcoin Volume Indicator
Looking at the volume profile, we can see that the majority of trading indeed occurred near $6500. This transpired over May-October 2018, before the breakdown which sent the price to $3200.
However, the current weekly candle is bearish engulfing, cutting inside significant support offered by previous wicks. This is a bearish development.
Additionally, we can look at the logarithmic support line and find a similar support level.The support line is drawn beginning in 2011 and the price has reacted to it more than five times.
Currently, it is at $6000. However, since it is ascending, it will move higher as time goes by. Therefore, if the price were to reach it next month, it would likely fall above $6500, the upper limit of the support area in the original tweet.
Another analyst which uses a similar support line and buy area is @davthewave. In a tweet, he stated that the Bitcoin price has entered the outlined buy zone.
Blood in the streets, red in the buy zone, now is the time to buy… if you have any dry powder that is… pic.twitter.com/mfFLcC1mcV
— dave the wave (@davthewave) November 22, 2019
He is using a descending channel in place since June 24 to limit the scope of price movement.
The buy zone is outlined from $5800-$6800, encompassing everything between the long-term support line and the lower limits of the channel.
Therefore, we can conclude that the $6000-$7000 level offers very significant support and is likely to initiate a reversal.
Disclaimer: This article is not trading advice and should not be construed as such. Always consult a trained financial professional before investing in cryptocurrencies, as the market is particularly volatile.
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