Bitcoin Rejects Key Resistance: Short-Term Cooling and Potential Liquidations Ahead

Bitcoin Faces Rejection at Critical Resistance

The cryptocurrency market is experiencing some turbulence as Bitcoin encounters resistance at a key level. Let's dive into the current state of Bitcoin, Ethereum, and the broader crypto market.

Bitcoin's Rejection from Major Resistance

Bitcoin is currently rejecting from a major descending line of resistance, which sits around the $67,000 to $68,000 range. This resistance line has been in place for approximately half a year, dating back to March of this year. Throughout this period, we've observed multiple rejections from this significant resistance level, forming part of a larger bearish trend.

Within this overarching bearish trend, we've seen shorter bullish trends lasting a couple of weeks. The recent price action over the past few weeks exemplifies this pattern - a short-term bullish trend within a larger bearish context. For this short-term bullish trend to transform into a longer-term bull run, we need to see a definitive breakout above the resistance level.

It's crucial to note that an initial rejection from this resistance doesn't necessarily mean we're headed for a significant downturn. For instance, in mid to late May, we saw a rejection that led to bearish price action for nearly a week, but the price eventually returned for another retest of the resistance within about a week.

Current Market Dynamics

As of now, Bitcoin has not confirmed a longer-term bullish trend or bull run. The current situation still represents a short-term trend within a larger bearish trend until we see a confirmed breakout.

Looking at the daily Bitcoin chart, we can observe that the price has started to break back below the previous resistance line, which should now be acting as support. This area is between $64,100 and $64,500. If we confirm a daily candle close below $64,000, the next level of support to watch is around $63,000.

Below that, we have additional support at $61,900 based on the volume profile indicator, and a major support area between $60,200 and $61,200.

Short-Term Trend Analysis

Technically speaking, we haven't yet invalidated the short-term bullish trend. As long as we hold above key support levels, there's still a possibility of maintaining the bullish trend. However, if we start to see breaks below these support levels or begin forming lower highs or lower lows, these would be indicators of a bearish trend reversal.

It's worth noting that we were due for a cool-off from the recent bullish price action. This was expected due to overbought conditions on the 6-hour Bitcoin RSI, which I discussed a few days ago. Such a cool-off, whether through sideways or bearish price action, helps reset the RSI to more neutral levels, potentially allowing for more upside later in the bullish trend.

Liquidity Levels and Potential Liquidations

As Bitcoin continues its short-term cool-off, we're approaching a major level of liquidity to the downside, sitting at approximately $62,200 to $62,300. This area is part of a larger liquidity zone between $61,900 and $62,500.

In this zone, there's over a billion dollars worth of liquidity, with hundreds of millions of dollars in long positions that would be liquidated if the price crosses below these levels. A break below the previous lows at around $62,000 would be a very bearish signal in the short term, as it would break bullish price structure and potentially trigger a long squeeze.

For the bulls, it's crucial to hold above the $62,000 to $62,500 range to maintain the possibility of continuing the short-term bullish trend.

Ethereum's Current Situation

Ethereum is also experiencing a slight pullback in the short term, aligning with Bitcoin's movement. However, it's still within the larger bearish trend that has been in place for months.

Key Support and Resistance Levels

Ethereum is holding above some major support levels:

• A significant "golden pocket" area of support between $2,150 and $2,200
• Another key support level at $2,450 to $2,500

As for resistance, there's a significant level at around $2,800.

Potential Invalidation of Bullish Divergence

On the daily timeframe, there's a possibility of invalidating the recent bullish divergence if we start to see a bearish trend reversal in the daily Ethereum RSI. Signs to watch for include:

• Formation of lower lows and lower highs in the RSI
• Breaking below the current support line
• Lower lows or lower highs in the price action

It's important to note that bullish divergences on the daily timeframe typically play out over a couple of weeks before losing relevance. The current bullish divergence has been in play for roughly three weeks, which is a common duration for such patterns.

Short-Term Price Action

Ethereum has broken back below the $2,660 to $2,650 range, which is a bearish signal in the short term. The next support to watch is around $2,550. If we break below this level, we could find support between $2,450 and $2,500. A break below this area would be very bearish in the short term, potentially leading to a pullback towards the $2,300 level or lower.

On the 6-hour timeframe, there's an active bearish divergence, which suggests we should expect either a pullback or choppy sideways price action. This aligns with the current cool-off from the bullish trend.

Solana's Price Action

Solana is also struggling around a key resistance area between $159 and $163, as previously warned. If the price breaks below the small support at $153 to $154, we could potentially see a retracement down to the $138 to $143 range, which should act as major support.

Solana's price is likely to follow Bitcoin and Ethereum's short-term movements. The 8-hour timeframe shows a bearish divergence playing out, which typically results in either a short-term pullback or choppy sideways price action over a few days to a week.

Market Outlook and Trading Considerations

The current market situation calls for caution and careful analysis of key support and resistance levels. While short-term trends can change frequently, it's important to keep the larger market context in mind.

For those looking to trade these market movements, it's crucial to use reputable exchanges and take advantage of any available bonuses or promotions. Always practice proper risk management and stay informed about market developments.

Remember that market conditions can change rapidly, and what applies in the short term may not hold for longer timeframes. Always do your own research and consider multiple factors before making any trading decisions.

Conclusion

The cryptocurrency market is at a potential turning point, with Bitcoin rejecting from a critical resistance level and other major cryptocurrencies showing signs of short-term cooling. While the larger trends remain intact, short-term movements require close attention.

Traders and investors should keep a close eye on key support and resistance levels, potential liquidation zones, and technical indicators such as RSI and price divergences. As always in the crypto market, be prepared for volatility and sudden changes in market direction.

Stay informed, manage your risk carefully, and remember that market conditions can shift quickly in the fast-paced world of cryptocurrency trading.

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