Bitcoin evolves just above the minor support at $22,300.
Technical indicators have not yet shown any signs of a bullish turnaround.
The BTC could be in sub-wave 5 of its third wave, or it has already started its fourth wave.
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The price of Bitcoin (BTC) declined sharply on December 21, momentarily dropping to a daily low of $21,815.
That said, the bullish structure remains intact and the price of Bitcoin System is expected to rise unless it falls below the invalidation levels described below.
Bitcoin’s Current Decline
On December 21, the price of the BTC dropped significantly from $24,102 to $21,815. The BTC candlestick has long wicks at each end, a sign of indecision due to both buying and selling pressure.
The movements of the associated technical indicators are also ambiguous. The RSI has just fallen below 70 (red arrow below), a sign of a possible trend reversal.
However, the MACD has not yet reached a lower momentum bar and the Stochastic Oscillator is forming a bullish cross.
A potential turnaround
The six-hour graph shows that despite a temporary drop below it, the CTO managed to stay above the minor support zone of $22,300. This is also the fibonacci retracement level 0.382 of the last increase.
The BTC created a long strand below this level, almost touching the fibonacci retracement 0.5 at $21,686. However, it managed to close above this level.
MACD has lost strength and RSI is declining, but RSI is still above 50 and MACD is above 0.
The two-hour chart also provides a relatively neutral outlook.
The RSI has dropped below 50 and has not generated any bullish divergence, while the MACD continues to decline.
The most plausible count suggests that the BTC is in sub-wave 5 (in black) of wave 3 (in orange), which is expected to end between $25,871 and $26,006.
Given this scenario, the December 21 drop looks very much like a Wave 4 downturn, after which upward movement is expected to complete sub-wave 5.
A drop below the December 21 trough, to $21,864, would likely result in the parallel channel being undercut and would invalidate this scenario.
The alternate count suggests that wave 3 is over and that the BTC is now correcting within wave 4. Even in this case, one would expect wave 4 to be fast and shallow due to the principle of alternation.
Wave 2 was long, taking more than twice the time of wave 1. Similarly, it returned to the fibonacci retraction level of 0.618. Thus, we would expect wave 4 to return to $20,940 (the fibonacci retraction level 0.5).
A drop below $19,918 (red line) would invalidate this wave count.
Which count is the most plausible?
A 30-minute observation of the data confirms the possibility that the BTC is in sub-wave 4 and will soon reverse its downward trend.
The reason for this is that the rise from the lows of December 21 (shown in green) seems impulsive, while the subsequent decline seems corrective.
As long as the BTC does not fall below the channel, it is expected to move back up and gradually move towards the near $26,000 targets.
The price of Bitcoin should soon reverse its trend and start to rise. A drop below $21,900 would delay this possibility, suggesting that BTC would then decline to around $21,000 before rising again.