The Possibility of a $20,000 Bitcoin Drop – What the On-Chain Analysis Suggests
Bitcoin is currently teetering on a delicate support level around $25,000. If this support is lost, it could trigger a significant decline in price. On the other hand, there is still a chance that holding this level will lead to a bounce and potentially break through the resistance at $30,000.
On-chain analysis suggests that a major move in the cryptocurrency market is imminent, given the realized price and historically low volatility. There is a possibility that Bitcoin could retest the $20,000 level.
Understanding Bitcoin’s Realized Price in Historical Cycles
The realized price of Bitcoin is a metric that evaluates the market capitalization by dividing it with the current supply. It values different parts of the supply at different prices based on their last movement. By analyzing historical patterns, we can identify cyclical similarities in the relationship between Bitcoin’s price and its realized price.
In each cycle, the bear market began when the Bitcoin price dropped below the realized price, signaling the macro bottom of the cycle. Conversely, when the BTC price broke out above the realized price, it marked the start of a long-term bull market.
While there was one exception in March 2020 due to the COVID-19 crash, generally, the BTC price rarely fell below the realized price until the next bear market cycle.
Looking at the current cycle, we observe similar patterns. Bitcoin dropped below the realized price in June 2022 and then oscillated around this line before experiencing a capitulation with the collapse of the FTX exchange in November 2022. However, in January 2023, BTC broke the downward trend and initiated a bounce, leading to a recovery and a quick retest of the realized price line.
Possible Retest of $20,000 Level for BTC
Currently, Bitcoin is at a crucial support level around $25,000. Technical analysis suggests that if this support is lost, a drop to the next support at $23,500 is possible. However, there is a possibility that BTC could dip even lower and retest the $20,000 level.
The realized price chart indicates that Bitcoin is currently hovering around this area. If historical patterns repeat, a dip below $20,000 could present an excellent buying opportunity for investors.
Famous analyst @WClementeIII has also shared a long-term chart of the BTC price, highlighting the possibility of testing the lower range. He believes that any retests of those lower bounds should be seen as buying opportunities.
Historically Low Volatility Suggests an Imminent Big Move for BTC
Another analyst, @el_crypto_prof, has drawn attention to Bitcoin’s extremely low volatility on high time frames. The Bollinger Band Width Percentile indicator for the 2-week chart of BTC shows that volatility has reached its lowest point in history.
After a compression period with such low volatility, one can expect a sharp move and an increase in volatility. However, the direction of the move remains uncertain, as the BBWP and the relative strength index (RSI) on the 2-week interval indicate no clear trend.
In a bearish scenario, if volatility increases and BTC plunges, it could test the realized price level near $20,000. This would present an excellent opportunity to enter the market. In a bullish scenario, increased volatility may coincide with the resumption of the uptrend, with $30,000 acting as a critical resistance level to overcome.
Editor Notes: Uber Crypto News
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