Bitcoin (BTC) experienced a very volatile week as the price of Bitcoin rose from $ 32,000 to $ 38,500 within 24 hours and back to $ 33,000.
The initial rise to $ 38,500 came within minutes of Elon Musk adding #Bitcoin to his Twitter profile.
However, no follow-up to the price movement was seen on the charts, as Bitcoin declined significantly in the following hours. Currently, the $ 34,500 area is a major resistance zone to break through if the market wants to maintain strong momentum.
Failure to break $ 38,000, causing the deductions
The levels that are critical to look at are highlighted in the graph above. Simply put, $ 38,000 must break for the rally to continue. Turning this level of support around opens the door to new everyday highlights.
However, the boom could not be sustained yesterday. After the failure of the $ 38,000 level, the $ 34,000 level could not provide the much-needed support for further upward momentum.
Therefore, the “Elon Musk pump” can be considered an outlier, and the general trend continues. This is a downward trend since the peak of $ 42,000, which is likely to continue unless the price of Bitcoin breaks $ 34,500 and supports it.
The strength of the dollar is bad news for Bitcoin
One of the primary arguments for more Bitcoin downside is the recoverable US Dollar Currency Index (DXY). This index shows a potential underlayment as a bullish deviation is seen at the significant 90-point level.
After this, the bullish deviation will be confirmed by a higher low, indicating that more upside is likely.
Strikingly, the previous easing of the DXY index in September caused a 20% correction for Bitcoin. However, since the easing battle, the DXY index has shown great weakness, one of the significant variables for the huge rise in the price of Bitcoin to $ 42,000.
However, February is not the best month for equities. The same can be concluded about Bitcoin, as was February 2018 when Bitcoin crashed to $ 6,000 after reaching its previous record.
Therefore, a recurring DXY may also contribute to the bearish sentiment for Bitcoin in February.
Bitcoin Dominance Index Eye Enlightenment
Historical charts show past market behavior, with many patterns being cyclical.
When Bitcoin’s dominance reached a peak in December, there were big rises in the altcoin market. After such a tremendous rally, however, a healthy correction would not be a surprise to test previous levels of resistance.
These tests would mean a bounce for Bitcoin dominance in February, which could open the door for a big run for the entire crypto market from March.
Critical Levels to Look at Bitcoin
The critical levels to look at are easy to see in the chart above. First, Bitcoin’s price should regain the $ 34,500 level as support to maintain the bullish momentum. If that happens, the amount will be tested again at $ 38,000. Most likely, the test will lead to an outbreak of more than $ 38,000 in the everyday high.
However, if the price of Bitcoin does not break $ 34,500, the downward momentum is likely, as the chart shows. In this perspective, the critical level to look at is the region of $ 30,000. If it cannot maintain support (after numerous tests), I expect a drop of $ 25,000 and the 21-week MA.
The views and opinions expressed here are only those of the writer and does not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risk. You must do your own research when making a decision.