Bitcoin’s price fell 3% as the US stock market plummeted, but traders expect these two key levels to prevent a deep decline in BTC.
The price of Bitcoin (BTC) fell by 3% in less than three hours due to the drop in the US stock market. After the drop, most traders are neutral or slightly bearish on the short-term trend of BTC.
Traders and analysts are now pointing to $12,500 and $11,973 as the two levels to watch for the continuation of the Bitcoin rally.
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BTC/USD pair chart. Source: TradingView.com
Why $12.5K and $11.9K are crucial to the current Bitcoin rally
The price of Bitcoin fell dramatically on the day due to the confluence of important macro factors.
JPMorgan said that the re-election of U.S. President Donald Trump would be the most favorable result for the stock market. Analysts at the investment bank wrote:
“We see an ‘orderly’ victory for Trump as the most favorable outcome for stocks.
Given that expectations of a Democratic sweep remain relatively high, it could have caused markets to shake.
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In addition to the electoral risk, the U.S. recorded a new peak in daily cases of COVID-19. Along with the fear surrounding the pandemic, House Speaker Nancy Pelosi said the Trump administration is refusing the stimulus package.
The Dow Jones Industrial Average (DJIA) plummeted by nearly 1,000 points in a single session. As the U.S. stock market plummeted, BTC plummeted, falling about 3.4% in several hours.
Despite this, technical analysts believe that it is difficult to conclude that the dominant cryptomoney will suffer a prolonged decline.
For now, the $12,500 support level remains a critical area that buyers must defend for three reasons.
First, it’s close to the 10-day moving average on the Bitcoin daily chart. Second, it’s the top of the previous peak on Aug. 17, making it a key support level. Thirdly, it has large whale groups, making it an area of interest for high net worth investors.
As long as BTC defends $12,500, the chances of an upward trend remain high. If Bitcoin can stay above $11,973 despite the rapid decline, then the short-term outlook remains particularly bright.
Bitcoin whale groups. Source: Whalemap
Researchers at Whalemap, which tracks Bitcoin whale activity, identified $11,973 as the level to maintain the upward trend. They said:
“11,973 is the level that $btc needs to maintain for the uptrend to continue.
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Even if BTC proves the low support level of $12,500, traders believe that this could make a healthier uptrend for BTC.
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The price of Bitcoin rose 15% since October 17 with hardly any decline, showing a strong momentum. After such a big rebound, a consolidation phase or a short-term setback could be beneficial for BTC. Cryptcoin trader Scott Melker said:
“I have orders of $12,100 to $12,500 in case we see a setback in daily TD9. As I said, ideally I would like to see a healthy setback to gather more strength for the next bend. A deeper recession and then drawn below would be better