Bitcoin (BTC), the price has yet to recapture the USD 40,000 level and traders expecting a quick resumption of the uptrend may have been caught off guard by the recent downturn. This could have resulted in the liquidation of approx $ 500 million of cryptocurrency futures positions in the past 24 hours.
Over-leveraged positions provide the necessary ammo during the uptrend, but they become a risk when the trend hits a tipping point.
When markets fall, leveraged long positions quickly turn into a loss, resulting in broker margin calls. When the margin requirements are not met, the brokers dump the positions at market price leading to a sharp dip.
Therefore, data containing a reduction in leveraged Bitcoin positions in recent days is a positive sign as it reduces the risk of cascading liquidations.
While a sharp drop is usually avoided if the markets are not overused, persistent buying is needed to maintain the higher levels. If not, the price will continue to gradually correct.
Grayscale Investments has been one of the top buyers in recent months, but they now have a new one competitor, Osprey Funds, which began trading in the over-the-counter market on January 15 under the ticker symbol OBTC. The company offers a competitive management fee structure compared to grayscale.
This is a positive sign for crypto markets as if both companies attract institutional investors, buying could resume and Bitcoin could change course to pursue new highs.
While Bitcoin gets stuck in a range, certain altcoins are hard at work. Let’s take a look at the charts of the top 5 cryptocurrencies that will be preferred by the bulls in the coming days.
BTC / USD
Bitcoin is currently consolidating in an upward trend. The price action in recent days has formed a symmetrical triangle, which generally acts as a follow-up pattern. The long tail on today’s candlestick shows the bulls are buying the dips off the 20-day exponential moving average ($ 34,241).
The ascending moving averages and the relative strength index (RSI) in the positive area suggest that bulls are in control. If the buyers can push the price above the triangle, the next leg of the uptrend can begin.
The first stop could be the current all-time high at $ 41,959.63, but if the bulls can propel the price above it, the BTC / USD pair could rally towards the $ 50,000 pattern target.
Contrary to this assumption, if the rebound doesn’t find buyers at higher levels, the bears may try to lower the price below the triangle. If they succeed, the pair could drop to the 38.2% Fibonacci retracement level at $ 29,688.10.
This level may attract buyers, but if the bulls fail to push the price above the 20-day EMA, the correction could deepen to the 50-day simple moving average ($ 26,581).
The 4-hour chart shows that the bulls have bought the drop to the support line of the symmetric triangle, but they may face resistance as the moving averages move downward.
If the price falls below the moving averages, the bears will try to lower the price below the triangle. If they succeed, a deeper correction is likely.
On the contrary, if the bulls can push price above the moving averages, the pair can move up the symmetrical triangle’s resistance line. A breakthrough of this resistance could trigger the upward trend.
However, if the price falls below the triangle’s resistance line, the pair can trade in the triangle for a few more days.
LINK / USD
Chain link (LINK) broke above the resistance of $ 20.1111 on January 15 and followed it up with another upward move on January 16, reaching a new all-time high at $ 22.96. But the long wick on the January 16 candlestick suggests higher levels of profit posting.
The price rebounded from the USD 20.1111 breakout level today, suggesting that the bulls have turned this level to support. If the bulls can push the price above USD 23 now, the LINK / USD pair could climb to USD 27 and then to USD 30.
The soaring 20-day EMA ($ 16.25) and the RSI near the overbought zone suggest bulls are in control.
Contrary to this assumption, the next stop is likely to be $ 17.7777 if the price falls below $ 20.1111. This is an important support because a break below it indicates a possible trend change.
The 4-hour chart shows that the breakout above USD 20.1111 had pushed the RSI deep into overbought territory, potentially attracting profit posting from short-term traders.
However, the positive sign is that the bulls aggressively bought the dip to the 20-EMA. If the bulls can hold the price above USD 21.5709, the pair could retest at USD 22.96. A break above this resistance could resume the uptrend. The ascending moving averages and the RSI in the positive zone suggest that bulls have the upper hand.
This optimistic view will be invalidated if the bears sink and keep the price below the 20-EMA. Such a move could bring the price down to $ 17.7777, indicating that momentum has weakened.
UNI / USD
Uniswap (UNI) is currently in an upward trend, but is facing sales above $ 9 as seen from the long fuse on Jan. 16 and today’s candlestick. If the bulls don’t give up much ground, this would suggest that after the recent rally, traders are not rushing to the exit and buying on dips.
The soaring 20-day EMA ($ 6.15) and the RSI in the overbought territory suggests bulls are predominant. If the UNI / USD pair stays above the 38.2% Fibonacci retracement level at $ 7.4725, the bulls will try to resume the uptrend.
If they can push the price above USD 9.3776, the rally could climb to USD 12.4597 and then to USD 15.
Contrary to this assumption, the pair could drop towards the 20-day EMA if the bears drop the price below $ 7.4725. Usually, a deep correction suggests that momentum has weakened and this could result in several days of range-bound action.
The 4-hour chart shows that the pair is currently consolidating following the recent strong upward movement. The bulls buy the dip towards the USD 8 support and the bears sell above USD 9.
If the bulls can push the price above the $ 9 to $ 9.3776 overhead resistance, the uptrend could resume.
On the other hand, if the bears drop the price below the 20-EMA, the drop could extend to the 50-SMA. Such a move could keep the couple on the range for a few days.
XTZ / USD
Tezos (XTZ) has been trapped in the $ 2.85 to $ 1.85 range for the past several weeks. The bulls are currently trying to push the price above the range and start a new uptrend.
However, the long fuse on the January 16 candlestick shows that the bulls are having a hard time keeping the price above the range. Today, the long wick and tail on the candlestick indicate indecision among the bulls and bears.
If the bulls can keep the price above USD 2.85, the likelihood of a new uptrend starting increases. The soaring 20-day EMA ($ 2.48) and the RSI above 66 suggests the path of least resistance is up.
The first target on the upside is $ 3.90 and then $ 4.4936. This optimistic view will be nullified if the XTZ / USD pair falls and breaks below the 20-day EMA.
The 4-hour chart shows that the bulls had pushed the price above $ 2.85 but failed to build on strength, prompting a correction. However, the bulls aggressively bought the dip to the 20 EMA and are now seeking to push the price above $ 3.1838. If they succeed, the uptrend can resume.
On the other hand, if the price falls from current levels or the overhead resistance and falls below the 20-EMA, it can correct to the 50-SMA. A break below this support could indicate that the recent breakout above USD 2.85 was a bull trap.
ATOM / USD
Cosmos (ATOM) rose above the stiff resistance of USD 8,877 on Jan. 16 and made a new all-time high of USD 9.60. Anytime the price ever hits a new record, it’s a sign that the bulls are in command.
However, the bears haven’t given up yet as they have pulled the price below USD 8,877 and are trying to trap the aggressive bulls. The bullish momentum could weaken if the bears price falls below the 61.8% Fibonacci retracement level at $ 7,093.
Conversely, if the bulls can defend the zone between the 38.2% retracement at $ 8.05 and the 50% retracement at $ 7,572, it will suggest strong demand at lower levels.
If the price moves out of this support zone, the bulls will try to resume the uptrend. A break above USD 9.60 could push the ATOM / USD pair towards USD 12.10 and then towards USD 13,974.
Both moving averages are increasing and the RSI is in a positive area, indicating bulls have the advantage. The pair has bounced back on the 20 EMA and the bulls will now try to push the price above the USD 8,877 resistance.
If they manage to do so, the pair could rise to $ 9.60 and a breach above that will signal a resumption of the uptrend. Conversely, if the bears drop the price below the 20-EMA, it will suggest that momentum has weakened and a drop to $ 7.50 and then to the 50-SMA is possible.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trade move carries risks, you should do your own research when making a decision.