During the past seven days, the crypto market witnessed an uptick in volatility as Bitcoin and Dogecoin price rallied higher simply because of social media activity. In similar situations, traders who make their investment decisions based on emotions are likely to suffer heavy losses. It is exactly what happened last week.
Dogecoin’s recent pump and dump caused several new traders who purchased due to FOMO to lose money in a short time. Social media groups have decided that altcoins’ collective pumps are a new way of investing. Hence this scenario should happen again.
Furthermore, a similar trend currently appears to be developing in Bitcoin. It has returned a large portion of the up-move caused due to the Elon pump on January 29.
According to Lennard Neo, Stack Funds head of research, Bitcoin miners are selling on rallied. That trend may resume as the Chinese New Year holiday is near. Neo says that Bitcoin is likely to remain volatile in the near term.
Even as Bitcoin’s price consolidates, the decentralized finance tokens resume rising. It implies traders’ focus has moved to the DeFi space.
The dominant cryptocurrency’s long fluctuate on January 29 reveals the bears aggressively sold the rally above the descending triangle’s downtrend line. Significantly, that was followed by a Doji candlestick pattern on January 30, showing uncertainty among the bulls and the bears.
Bears are trying to maintain BTC below the 20-day exponential moving average
The breakdown of the bulls to drive the price above the downtrend line today has attracted further selling. The bears are currently striving to maintain the price below the 20-day exponential moving average, which is $33,395.
In that case, the BTC/USD pair may fall to the 50-day simple moving average, which is $30,631 and then to $28,850.
A decline and close below $28,850 will make the bearish descending triangle pattern with a target objective at $15,741. However, it should not be a straight drop. The bulls will attempt to arrest the slump at the 50% Fibonacci retracement level at $25,897.42 and again at the 61.8% retracement at $22,106.73.
This negative view will nullify if the price turns up from the current level or rebounds off the $28,850 support and stays above the downtrend line. Such a move will imply strong accumulation at lower levels, resulting in a surge to $40,000.
