Bitcoin’s (BTC) price has been grinding up nicely over the past few weeks, but the past 24 hours have seen a significant correction. BTC price dropped by over $10,000 from $58,000 to under $48,000, a correction of almost 20%.
This pullback — which many anticipated as 28,000 BTC was deposited to Gemini — also caused other cryptocurrencies to fall alongside Bitcoin, resulting in Bitcoin’s market dominance rising as a result.
But will history repeat and produce a dull, corrective March? Let’s analyze the charts.
Bearish divergence implying further downside to come
Markets never go up in a straight line, and corrections must occur from time to time. This can be considered a “reset” for the market, which reverts back to the mean trendline, and the euphoria fades.
At the first stage of a correction, people still expect the corrective move to be a tiny correction, while the sentiment slowly starts to shift. The moment the correction continues, the lower the price goes, the worse the sentiment becomes.
At the bottom, Bitcoin will be called “dead” and a Ponzi scheme once again, after which the price has historically recovered.
The critical question now, however, is whether the market will see a prolonged correction or if Bitcoin’s price will hold above the green box shown in the chart above. That green box is the previous period of compression that technically should serve as major support.
If the area between $42,000 and $44,000 holds, upward continuation is likely. In that case, the point of interest at $63,000 is still on the table.
However, the bearish divergence and the weakness at the start of this week suggest more downside is possible. In that regard, losing the $42,000–$44,000 area could result in a further correction toward $37,000.
March historically isn’t a bullish month
The weekly chart for Bitcoin shows some beautiful historical data, which shows that March tends to be a period of correction or consolidation. Massive corrections happened in 2017, 2018 and 2020 during this period, while 2016 and 2019 saw sideways price action.
Of course, history is not guaranteed to repeat, but history rhymes, and historical data often provides insight into how market cycles work.
In that regard, the critical indicator to watch is the 21-week moving average (MA), which should hold Bitcoin’s price from dropping further. From that perspective, the current price level of the 21-week MA is found at $28,000, and this will crawl up to $32,000 to $34,000 in the coming weeks.
Thus, the recent higher low is created at $30,000, which means that a further drop toward $38,000 to $40,000 is not unlikelym as that would be a regular 30% to 40% correction.
Critical levels to watch for Bitcoin
The daily chart of Bitcoin shows some critical levels to watch for the current period. First of all, the recent drop-down brought Bitcoin’s price to a vital support level. It should hold this zone between $42,000 and $44,000 to avoid more downside.
If this doesn’t hold, a further drop to the level around $37,000 is likely. This would also grant a retest of the 21-week MA.
However, if the green zone between $42,000 and $44,000 does provide support, a rebound is likely toward $63,000, as previously stated.
However, this is too early to call, as historically, the end of February and March is a corrective, not a bullish period for the markets in general.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.