- Bitcoin price sell signals on the daily time frame persist.
- A correction could send BTC 10% to 15% lower to $33,000 and $35,000 levels.
- Invalidation of the bearish thesis will occur if BTC flips the $40,100 hurdle into a support floor.
Bitcoin (BTC) price, from a high time-frame perspective, has been in an up-only trend since the start of 2023. BTC has ignored many sell signals due to the likelihood of an Exchange-Traded Fund (ETF) approval. With the holidays around the corner, falling liquidity could see BTC discounted from its current level, hovering around the $37,000 region, where it has been for roughly two weeks.
Bitcoin sells signals and discount
Bitcoin price has been in a slow uptrend since October 27. This climb has produced multiple higher highs, which do not conform with the Relative Strength Index’s (RSI) lower highs. Such non-conformity is termed bearish divergence and is a sell signal that forecasts a move in the opposite direction. This move could either be a small pullback or a steep correction.
The daily Bitcoin price chart shows that the higher lows produced since October 27 have uncollected sell-side liquidity that has not been collected.
Hence, there is a risk that the bearish divergence-induced pullback could knock Bitcoin price down to $33,350, which is the October 27 swing low.
Resting just below is the Momentum Reversal Indicator’s support trend line at $32,833 and the weekly support level at $31,767. These levels are roughly 12.6% and 15.4% away from the current position of $37,587.
Hence, investors should expect a 10% to 15% downswing.
Considering the reduced volume and liquidity during the holiday season, investors can expect this correction to come sooner rather than later.
BTC/USDT 1-day chart
According to data from CoinGlass, the $37,900 to $38,100 range harbors roughly $3 billion worth of liquidity. When the price moves against a trader’s position, crypto exchanges calculate the liquidation levels based on the margin available. A liquidation event occurs if the price moves against a trader’s position and there is insufficient margin to cover the open positions.
These areas act as magnets for the underlying asset to move in that direction. Once the liquidity is collected, trend reversals are likely to occur, but not always. In some cases, the price can continue to move in the same direction.
For Bitcoin price, the last liquidity event was on November 9, which immediately led to a reversal.
From a technical analysis perspective, the highest probability scenario for a correction to occur would be after the sweep of the liquidity resting around the $38,000 region or the November 9 swing high of $38,500.
BTC liquidation levels
While the Bitcoin price correction scenario detailed above is logical, investors should note that the ETF approval narrative has a lot of potential and could continue to push BTC higher up to $40,000 before a correction could occur. In some cases, this much-anticipated pullback might never happen.
If Bitcoin price overcomes the MRI’s breakout level at roughly $42,100, it could attract sidelined buyers and retail investors to step in, extending the 2023 rally. This move would invalidate the bearish thesis for BTC.
As FOMO snowballs, BTC could eye to revisit the whole number levels like $45,000 and $50,000.
(This story was corrected on November 24 at 15:33 GMT to say that Bitcoin's price move over the $42,100 level would invalidate the bearish thesis, not $42,1000 and not bullish thesis.)
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.