Bitcoin Fails to Break $25K After Picture-Perfect Bounce
El Salvador Spreads Crypto ‘Love’, Opens New Bitcoin Embassy.
If you want to find a perfect example of how the principle of support and resistance works in trading, then look no further than Bitcoin’s latest price action. In late January, the apex cryptocurrency started to show indecision and rejection (doji candles and pinbars), coupled with bearish divergence, and overbought RSI.
These were all signs that a pullback was coming and according to technical analysis principles, a good place for the potential pullback to stop is the first significant support (assuming the support level is a good distance away from the current price). If that support holds, the asset should bounce and break the previous high, aiming for the next resistance beyond that high.
This is what ‘the book’ says but in real market conditions, many things can happen. Not this time! Bitcoin did exactly what ‘the book’ said it would do. The divergence and overbought combo resulted in a drop that took BTC/USD straight into the support at $21,400 ($21,376 to be exact) and after a few days spent on the level, the pair lifted straight into the next target – the resistance at $25,000.
After piercing the key level at $25,000, Bitcoin retreated to $23,670 where it is currently trading. It will probably make another attempt to break the key level at $25K but the timing of that move is uncertain.
El Salvador’s Second BTC Embassy
Moving away from the charts, it looks like Bitcoin is getting support from its country-friend, El Salvador. Just recently, El Salvador’s U.S. ambassador Milena Mayorga announced on Twitter that El Salvador will open a “Bitcoin Embassy” in Texas. This intergovernmental project aims to support new projects that are meant to speed up Bitcoin adoption.
The initiative comes just a few months after El Salvador opened the first “Bitcoin Embassy” in Switzerland, in October 2022. It will be interesting to see if any tangible actions come out of these collaborations.
Chart Analysis – BTC/USD
The quick move that took BTC from $21,400 to $25,000 needs a bit of consolidation before another attempt to break resistance is made. Notice that the price made another high but the RSI is still printing lower highs, so the bearish divergence is still present.
On the lower timeframes (4H), the bullish move took the pair deep into overbought territory and now the RSI has just entered back into the non-extreme territory. With that being said, it wouldn’t be out of the question for the price to drop further.
Unless we see a strong influx of new buyers, price action will likely take a break and the wild moves will calm down a bit. Of course, given Bitcoin’s historical volatility, the ‘calming down’ scenario could be blown out of the water. Overall the bias remains bullish, anticipating another attempt to move past $25K, without excluding more drops first.
