Bitcoin (BTC) recently experienced significant volatility, dropping to $62,498 on August 1, the lowest in two weeks. This decline is attributed to reduced expectations of a rate cut in the US and the distribution of 47,000 BTC from the bankrupt Mt. Gox exchange. Investors are now closely monitoring key support and resistance levels to determine the next major buying opportunity.
Critical Support and Resistance Levels for Bitcoin
Analyst Stockmoney Lizards shared on August 2 that Bitcoin is approaching a critical point, offering a potential entry point for market participants. According to technical analysis, Bitcoin’s recent price movement is characterized by a classic 5-wave uptrend followed by an ABC correction. This pattern is seen as a distinct Elliott Wave formation on the 4-hour chart.
The first buying level to consider is in the range of $61,880 to $62,300. The analyst identified this range as a critical support zone. This area is strengthened by the confluence of various technical indicators such as the 1.618 Fibonacci extension, the 0.5 Fibonacci retracement, and the Value Area Low (VAL). A recovery from this range could signal the continuation of the uptrend on higher time frames. However, if the price fails to hold above this support zone, the next significant level to watch is around $56,810, corresponding to the 2.618 Fibonacci extension. This level could present a new buying opportunity if the price does not hold the initial support.
On the upside, the first major resistance for Bitcoin is at $66,745, marked by the Point of Control (POC). Historically, this level has acted as a significant resistance point, and a breakout supported by strong trading volume could indicate a buying opportunity that may push the price to new highs. Additionally, the area around $69,885, marked by the Value Area High (VAH), also serves as resistance and is a critical level to watch closely.
Why is Bitcoin Dropping?
Currently, Bitcoin’s price is under selling pressure due to multiple factors. On July 31, the US Federal Open Market Committee (FOMC) decided to keep the interest rate at 5.25%, in line with market expectations. Fed Chairman Jerome Powell emphasized strong GDP growth and confidence in reducing inflation, signaling a cautious approach to future rate cuts.
In response, investors increased their investments in US Treasury bonds, with the five-year yield falling to a six-month low. This shift was further influenced by rising geopolitical tensions and increasing unemployment claims.
Another significant factor was the distribution of nearly $3 billion worth of Bitcoin from Mt. Gox on July 30. This created fears of a potential selling wave. The BTC in question was transferred to exchanges like Kraken and Bitstamp, contributing to the recent price decline as investors anticipated a significant market impact.
