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15.05.2023 10:43 AM
Bitcoin tests $25.5k level and is at crossroads

The previous trading week turned out to be bearish for Bitcoin. The asset was declining within the local downward trend to the $27k level. Subsequently, the correction was exacerbated due to a spike in volatility, and the asset continued to decline to $26k.

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By the end of Friday, the Bitcoin price managed to test the local low near the $25.5k level. It is in this range that large volumes of liquidity, formed by investors during the price consolidation above $26k, are located. However, we did not see a strong reaction from buyers over the weekend, indicating the likelihood of further decline.

Will Bitcoin go even lower?

Bitcoin has been in a correction phase for over a week, and during this period, the asset has achieved the main correction targets. The BTC price managed to reach the $25.5k level, but we only saw a reaction from buyers on Monday when the price managed to recover above $27k.

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This recovery growth can be called a "dead cat bounce," as the buyers' positions have clearly weakened. It is not expected that the pullback after the correction could be strong enough to reverse the trend, as trading volumes remain low and market sentiment is pessimistic.

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At the same time, it should be noted that Bitcoin has fully implemented the "head and shoulders" pattern, which indicated a trend reversal. The cryptocurrency price has reached the ultimate potential of this pattern, and the long lower wick of the last candle indicates a local profit taking.

Bitcoin at a crossroads

Despite the realization of the final potential of the "head and shoulders" technical analysis pattern, as well as the local upward pullback of the BTC price, we cannot state the completion of the corrective movement. The $25k–$25.5k level is the basis of the upward trend, which allowed BTC to reach the $31k level, and its breakdown will lead to the destruction of the structure of the upward trend.

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Given that the bulls did not play back the $25.5k test, and the price managed to trade near the $26.5k level for a while, we should consider the probability of exacerbating the downward trend. In other words, the weakness of the buyers puts Bitcoin at a crossroads, where one of the movement options is the destruction of the structure of the upward trend.

Bearish scenario

The bearish scenario for Bitcoin would be a local consolidation near $27.5k, followed by a further plunge towards the $25k–$25.5k range. In this scenario, BTC/USD has the potential to make a bearish breakdown at the $25k level and start moving towards $24k. As it has become clear, no strong buyer is found below $26k, and therefore, the price can be pressured further.

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The local support level for the Bitcoin price on the way to $24k could be the $24,650 mark. This is where the local accumulation stage took place, so there is a chance for an attempt to buy back the price and start a recovery movement. However, if this mark is broken and further decline to $24k, the structure of the upward trend is completely broken, and the key target for the correction becomes the $20k level.

Bullish scenario

In the bullish scenario, after local consolidation, Bitcoin manages to defend the $26k level during subsequent attempts at bearish pressure. The key target for buyers at this stage is to maintain the structure of the upward trend. To do this, it is necessary to protect the $25k level and restore the cryptocurrency price above the $28k mark.

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However, as of 08:00 UTC on Monday, the probability of a bearish scenario is higher. There is no strong buyer in the market, and the local positive of technical indicators is negated by the sharp downward peak of the MACD and bearish sentiment. The situation may change with the opening of the U.S. markets, but at the moment, there is a total dominance of bears in the BTC market.

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