The cryptocurrency market experienced a sharp decline, resulting in a loss of almost $200 billion in value. This devastating selloff was triggered by rumors of potential denial of Bitcoin ETF approvals by the SEC. However, despite the chaos in the market, some experts believe that this could be an ideal opportunity for dip buyers. This article will explore the recent market plunge, analyze the potential buying opportunity, and provide insights based on high timeframe indicators.
In the early hours of the morning, the price of Bitcoin began to plummet, leading to a cascade of liquidations in altcoins. Bitcoin itself witnessed a significant drop of nearly 10%, while altcoins experienced even more substantial declines ranging from 20% to 30%. Such a sudden and drastic move in the market naturally instills fear, uncertainty, and doubt among investors.
When faced with doubts, it is often advised to zoom out and analyze the market from a higher timeframe. By moving away from the daily chart and shifting focus to monthly or longer timeframes, a more comprehensive perspective can alleviate concerns generated by the immediate fluctuations. Despite the unpleasant wick left behind on the daily chart, the high timeframe view reveals a confirmed breakout with high volume.
After three years of declining volume, a high volume breakout like the one observed now is undeniably significant. This breakout may indicate the possibility of a bull run in the cryptocurrency market during the upcoming months. As volume tends to validate price breakouts when accompanied by technical indicators and chart patterns, the current situation is promising. Notably, the 1M BTCUSD closed above Ichimoku’s Kijun-sen in 2020 and remained above it in 2021, a phenomenon that did not occur in the previous year. Additionally, Bitcoin closed above the upper Bollinger Band, further supporting the buy signal generated in 2020.
A high volume signifies increased trading activity at the current price. More trading volume often suggests participation from significant players or broad market involvement. Both scenarios have bullish implications. However, for this potential buying opportunity to materialize, the monthly chart must close with a green volume bar, indicating a gain in the overall market.
While the recent plunge in the cryptocurrency market has created panic and uncertainty, it could also present an advantageous buying opportunity for investors. The confirmation of a breakout accompanied by high volume after years of declining volume is a positive indicator for a potential bull run. However, it is important to conduct thorough research and evaluate the risks before making any investment decisions. Investing in cryptocurrencies carries inherent risks, and therefore, caution should always be exercised.
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