Bitcoin faced an extreme correction this morning.
Within 12 hours, the cryptocurrency plunged from the $41,000 region to lows on spot exchanges near $34,000 and lows on futures exchanges near $35,000.
BTC lost over 15% during this rally.
The cryptocurrency has since bounced quickly to the upside and regained a key support level, according to analysts.
However, Bitcoin Code quickly bounced upwards as buyers jumped in (invest too? Go to the buy Bitcoin cheap guide).
After the flash crash, bitcoin recaptures critical area
Bitcoin faced an extreme correction earlier today. Within 12 hours, the cryptocurrency plunged from the $41,000 region to lows near $34,000 on spot exchanges. The cryptocurrency lost over 15% over the span of this rally.
Many thought this was the beginning of a major correction. Even as the cryptocurrency was near the lows, funding rates and premiums on futures exchanges for BTC were extremely high – meaning that a continuation of the downtrend was increasingly likely.
The cryptocurrency has since regained a key support level, according to technical analysts.
A crypto asset trader shared the chart below after the rally, commenting that Bitcoin has recaptured a key technical support level on its 15-minute chart. While this is not the end all support levels, analysts are optimistic that this technical event could help fuel the ongoing recovery.
However, Bitcoin is facing some overhead resistance that could put an end to the ongoing recovery.
Chart of BTC’s price performance in recent days by crypto asset trader and chartist Pierre (@Pierre_crypt0 on Twitter).
Time for a pause?
However, on-chain data may show that the ongoing rally is starting to overheat and that a short-term correction or medium-term consolidation could follow. Philip Swift, an on-chain analyst, comments that the cryptocurrency is reaching overheated levels according to a key on-chain-focused indicator.
Referring to the chart below, he writes:
„I am starting to feel that the market is now approaching overheated levels. One data point to watch is the MVRV Z-Score, which looks at the extremes in the data sets between market value and realized value… We can see that when the Z-Score enters the red zone, it signals a market top. We’re not there yet, but a few more parabolic days up for the price and we will be.“