Bitcoin, Warning of Collapse to $66,898...Thought It Was a Bull Market, But Is It a Dead Cat Bounce?

▲ Bitcoin (BTC), Decline/ChatGPT Generated Image

Bitcoin (BTC) attempted a recovery after falling below the $75,000 support level, but the market remains at a critical juncture. Analysts have identified the $78,258 resistance and $75,733 support levels as key price points that will determine Bitcoin's next major move.

According to NewsBTC on May 26 (local time), Bitcoin fell by about 4.5% over the weekend amidst geopolitical tensions, dropping to $74,289. It then rebounded by 1.6% on Monday, rising above $77,000. However, despite the short-term recovery, the market direction is not yet confirmed, and the price remains within a channel formed during a structural reset process.

Analyst Ali Martinez stated that Bitcoin entered a sideways trend after a sharp drop in February, and during this period, the market is accumulating liquidity ahead of its next decisive move. He explained that Bitcoin is currently near the top of the channel after being rejected at the $82,500 resistance level, and buying conviction is aggressively increasing.

Martinez noted that derivatives traders are strongly betting on a breakout, with funding rates recently climbing to 0.4%, marking a two-month high. He previously explained that when funding rates reach this level, it signifies that the derivatives market is entirely dominated by aggressive buyers, and traders are paying high premiums to maintain long positions.

On-chain data also indicated that large whales have rebalanced their portfolios within a narrow price range. According to the article, some large whales reallocated over 18,447 BTC, with the value of these holdings estimated at approximately $1.42 billion. Martinez stated, "This concentration of supply has placed Bitcoin between the $78,258 resistance level and the $75,733 support level."

He suggested that if Bitcoin reclaims $78,258, a rally to $84,569 could follow. Conversely, if it loses the $75,733 support, it could fall to $66,898. These two price points were presented as benchmarks for determining the market's next major direction rather than short-term volatility.

Other market observers also identified the $75,000 to $78,000 range as a key short-to-medium-term price zone. Daan Crypto Trades stated that Bitcoin's bull market support band lies within this range. He emphasized that Bitcoin has failed to hold the upper end of this band as support for two consecutive weeks, stressing that defending this range is necessary to maintain a bullish trend.

Daan previously warned that if Bitcoin falls below the $75,000 to $76,000 range and the weekly close forms below this area, it could signal that the recovery rallies in April and May were a significant deviation or a dead cat bounce. Failure to hold this range would imply a shaken market confidence in the recovery trend itself.

Merlijn The Trader pointed out that Bitcoin was rejected at its 200-day moving average. He explained that this indicator is at the same price level that prevented a bull trap in 2022, during which Bitcoin experienced a 40% correction in that range. He suggested that if the $75,000 to $76,000 range is lost, a decline towards the CME gap near $67,000 could accelerate.

Merlijn The Trader analyzed that Bitcoin's major peaks have shown a pattern of testing the 21-week simple moving average three times before leading to a low. He explained that after the $69,000 cycle peak in 2021, Bitcoin retested the 21-week simple moving average three times during its decline before reaching a bear market bottom. This time, the indicator has been retested twice, and if past patterns repeat, he stated that a further decline to a 'true bottom' near $50,000 could occur in the coming months.

Despite recovery attempts, Bitcoin has yet to determine its direction between the $78,258 resistance and $75,733 support levels. The market's next move has narrowed down to either a rally to $84,569 if $78,258 is reclaimed, or a fall to $66,898 if $75,733 is breached.

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