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Bitcoin, the largest cryptocurrency by market capitalization, has slowed its decline since U.S. exchange-traded funds for the largest digital asset began trading on Jan. 11 and now faces a critical test if a bottoming signal on its charts is confirmed.
Bitcoin climbed over 4% on Wednesday, reaching a high of $40,527 before trimming its gains to trade at $40,091 at press time.
Given Bitcoin's recent bounce from lows of $38,501 on Jan. 23, Glassnode cofounder "Negentropic" on X wonders if it just bottomed in a "descending wedge with a classical throw-over."
Adding to that, if this is the case, Bitcoin may rally to $42,000 before retesting $40,500, after which it should skyrocket. The Glassnode cofounder added reassuringly that the "bigger picture still remains very bullish" for the Bitcoin price.
The digital asset markets observed an upswing in speculation leading up to the Bitcoin ETF approvals, with a general sell-the-news event playing out over the following days.
Bitcoin has fallen over 20% from an intraday high of $49,021 when the ETFs went live, as excitement over the products gave way to anxiety about the eventual extent of demand for them.
Bitcoin demonstrates resilience
According to Glassnode, an increased level of resilience can be noted across several cycles if the severity of Bitcoin bull market corrections by cycles is assessed. Currently, the largest drawdown has reached a value of only -20.1%, paling in comparison to historical precedence.
The latest sell-off marks the fourth time in the last year or so that Bitcoin has lost approximately 20%.
Elliott's wave theory claims that markets are prone to repeating wave patterns. Applying the approach to Bitcoin implies that the largest cryptocurrency will find a base between $36,000 and $38,000 before a fifth wave reignites last year's ascent.
According to cryptocurrency analyst Ali, historical patterns demonstrate that in bull markets, BTC price declines are consistently followed by further upside increases. This implies that declines could provide smart buying opportunities for investors eager to capitalize on Bitcoin's potential rise.
Gamza Khanzadaev
Godfrey Benjamin
Arman Shirinyan
