Bitcoin remains very volatile even after recording a significant bounce in the first half of the week. Michaël van de Poppe, a market researcher, stated that BTC has shown signs of recovery lately, but the market overall is showing a lot of turbulence. The high profile trader noted that Bitcoin is seen as overextended to the downside and it is due to the current corrective pattern that has rocked traders throughout key periods.
His new chart analysis reveals that Bitcoin is in a repeat liquidity sweep as trends of the prices have continued to fall below important levels of support. These liquidity grabs have formed extended wicks and sudden reversals, which indicate increased uncertainty and extreme selling drive.
Van de Poppe however argues that such moves are characteristic of deep corrective cycles and can provide accumulation opportunities in the long run.
Market Overextension Signals Potential Reversal
Although the recent downward extension is there, analysts are of the view that the market is on the verge of a critical inflection point. Van de Poppe pointed out that the metrics indicate that Bitcoin is a bit overextending on the downside, suggesting that the selling pressure can be approaching its limit.
The chart marks a few important points where liquidity is stolen, especially in the areas of $100,700 and $91,000. These points are areas where traders used to have stop-losses before hence the rapid downward wicks. When liquidity reaches these levels it normally stabilizes and starts developing a new base.
According to Van de Poppe, such macro structures are reversed over time. He does not believe that this will cause an immediate rally but hopes that Bitcoin will consolidate in this area before any serious upward trend. This sideways accumulation is usually a springboard to more serious bullish ride.
Bitcoin Expected to Build a Base Before Next Leg Up
The chart indicates that Bitcoin can start developing a base between $86,500 and 91,000, which has been tested in the previous corrections. This consolidation area is referred to as a great entry in the case of repetition of historic patterns.
Considering the behaviour of Bitcoin during various cycles, the long accumulative periods following extensive corrective actions usually have been followed with powerful rallies and even new all-time highs.
Van de Poppe adds that the following significant areas of resistance are about $111,900 and 119,500. The reclaiming of these areas in a clean way would allow another escapes attempt. He warns however that it would take the market some time to get to such levels unless a consistent base is re-built within the existing range.
He also referred to a potential retest of the lower timeframe support areas prior to any upswing recovery. The levels of $80,900 and 76,600 are also still essential in case of further correction.
Long-Term Outlook Remains Strong Despite Short-Term Weakness
Despite the mixed market mood, the long-term perspectives expressed in the analysis are quite positive. According to Van de Poppe, purchases in this current area will be wonderful in the next few years, indicating that these dips are part of the accumulation cycle and not structural failure.
In the past, there have been similar cycles in which powerful corrections wipe off the hand of weaker investors until the coin is once again on its upward trend. The recent market trend, which is defined by liquidity sweeps, panic selling, and frequent retests of support areas, is in line with the previous cycles.