Bitcoin (BTC) is likely to end 2021 well below analyst target projections of $ 100,000. Kraken CEO Jesse Powell, who had also projected a $ 100,000 price target for Bitcoin, remains bullish for the long term, but does not rule out a sharp short-term decline.
One of the negatives that can add pressure to Bitcoin in the short term is the change in monetary policy from the US Federal Reserve. On December 15, the Fed announced that close your bond purchase program at a faster pace, and it also projected three interest rate hikes in 2022.
Sam Stovall, chief investment strategist at CFRA Research, said CNBC that historically, the S&P 500 tends to post negative returns in the 12-month period when the Fed undertakes three or more rate hikes.
If history repeats itself, Bitcoin could also have a hard time escaping due to its strong correlation with the S&P 500 at various stages in 2021. It is difficult to predict with certainty whether investors will continue to buy Bitcoin to protect their portfolio against rising inflation if there is a risk. The feeling of disapproval will lead to a profit reservation.
With this uncertainty, let's go to the charts and run a long-term Bitcoin analysis to determine the critical levels to watch out for.
Bitcoin's strong rally in 2017 pushed the Relative Strength Index (RSI) above 96, indicating a state of euphoria among traders. Vertical rallies are rarely sustainable and are often followed by a strong correction or period of consolidation. That's what happened after the bullish move ended in 2017. The BTC / USD pair remained stagnant below December 2017 highs until it surpasses $ 20,000 in December 2020. This shows a great base building period of roughly three years. The pair's strong rally in 2021 pushed the RSI above 91 in March before the profit reserve was established. However, unlike in 2017, the bulls aggressively defended the 20-month exponential moving average ($ 37,281). This suggests that sentiment remained positive and traders were using the dips to accumulate. The subsequent rally carried the pair to a new all-time high of $ 69,000, but the bulls were unable to sustain the higher levels. This shows that the traders are making a profit on the rallies. The sharp correction has once again pushed the price towards the 20-month exponential moving average (EMA) and the RSI is showing signs of a negative divergence, indicating that the bullish momentum may be weakening. If the bears sink and hold the price below the 20-month EMA, the pair could fall to the critical support at $ 28,800. This is an important level for the bulls to defend because a break below it could result in a long period of base building. On the other hand, if the price rises from the current level, the pair could retest $ 69,000. A breakout and close above this resistance could indicate the resumption of the uptrend. The bulls pushed the price above the $ 64,899 level twice, but were unable to sustain the higher levels. This could have caught aggressive bulls buying the breakout, resulting in a long sell-off. The 20-week EMA ($ 52.016) has started to turn down gradually and the RSI has dipped into the negative zone, suggesting that the bears are attempting to turn back. The bulls tried to defend the 50-week simple moving average (SMA) ($ 47,709) but were unable to propel the price above the 20-week EMA. This could have attracted more selling, and the bears are now trying to sink the price to the next strong support at $ 39,600. This is an important level for the bulls to defend because if it breaks down, the pair could plummet to $ 28.732. Such a move could delay the start of the next leg of the uptrend and may keep the pair stuck in a range between $ 28,732 on the downside and $ 69,000 on the upside. Conversely, if the price rises from the current level and breaks above the 20-week EMA, the bulls will make one more attempt to clear the $ 64,899- $ 69,000 overhead resistance zone. If successful, the bullish momentum could pick up and the pair could begin its journey north towards the $ 100,000– $ 109,000 price zone where the rally may face strong headwinds. Alternatively, a breakout and close below $ 28,732 could result in a bear market with the next strong support at $ 20,000. Related: Bitcoin Tests $ 100K Annual Moving Average By Christmas Needs 'Little Miracle' The pair has been falling within a descending channel for the last week. Both the moving averages are declining and the RSI is in the negative zone, indicating that the bears are in control. If the price turns down from the current level or the 20-day EMA ($ 50,054), it will suggest that sentiment remains bearish and traders are selling on rallies. That could push the price to the intraday low on December 4 at $ 42,333. This is an important level that the bulls must defend because if it breaks, the bears will try to sink the price below the support line of the channel. If they can do that, the sale could escalate further. The zone between $ 39,600 and $ 37,300 can act as a strong support, but if the bulls fail to push the price above the 20-day EMA, the decline can extend to $ 28,800. Conversely, if the price rises and breaks above the resistance line of the channel, it will indicate that the selling pressure could be easing. The pair could then move up to the 50-day Simple Moving Average (SMA) ($ 56,524), which again may pose a difficult challenge. The bulls will have to push and hold the price above the 50-day Simple Moving Average (SMA) to signal the start of an upward move to $ 60,000. This level can act as strong resistance, but if crossed, the rally could retest the all-time high. The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and business move involves risk, you should do your own research when making a decision.BTC / USD
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