A trader is anticipating Bitcoin to experience a short-term rally, termed a "Dead Cat Bounce," at the EMA21 support level before ultimately falling below $80,000. This prediction is based on Bitcoin's historical price cycles, which suggest that after sharp price increases (cycle tops), the price tends to correct and find support at the EMA21 before further declines.
The EMA21 (21-period Exponential Moving Average) continues to function as a critical support level. However, once this level is broken, it may signal the onset of a deeper bearish trend and a more significant price decline for Bitcoin.
The trader specifically highlights the EMA21 as a crucial support level for Bitcoin. The analysis suggests that when Bitcoin tops out and initiates its first wave of a bear market, the price often finds support at the EMA21. The expectation is for a bounce from this support level, which would form a lower high, indicating that the bearish trend persists. Following this "Dead Cat Bounce," the anticipation is that the EMA21 will eventually break, leading to a more substantial decrease in Bitcoin's price.
Bitcoin's Historical Cycles
A review of Bitcoin's historical price action on a 1-month chart, referencing the EMA21, reveals a recurring pattern. The chart displays key points where Bitcoin reached its cycle top in various years. Historically, Bitcoin's price has often followed an upward trajectory, frequently finding support along the EMA21 before experiencing upward bounces.
This historical data illustrates significant upward movements in Bitcoin, marked as cycle tops, which are subsequently followed by substantial corrections or bear markets. During these periods, the price has often found support at the EMA21. The data showcases Bitcoin's major price movements over several years, with notable percentage increases between cycle tops, such as 104.2%, 47.4%, and 68.9%. This historical context strongly supports the prediction that Bitcoin could replicate a similar pattern of finding support at the EMA21 before a larger price decline.
Combined Analysis
Both the trader's prediction and the historical analysis of Bitcoin's cycles suggest a potential continuation of past patterns. After a sharp rise to a cycle top, the price is expected to correct and find temporary support at the EMA21. The trader's expectation of a "Dead Cat Bounce" from the EMA21 support level, followed by a further decline, is consistent with the historical behavior depicted in the charts. The EMA21's role in past transitions, where price corrections occurred after reaching new highs, reinforces this outlook.
In summary, the available information indicates that Bitcoin may be entering the early stages of a bear market. While a short-term upward movement is anticipated from the EMA21 support, a more significant downturn is expected thereafter. The EMA21 remains a critical technical level to monitor closely for both potential support and a possible breakdown in the near future.