This morning, Bitcoin price fell to under $7,100 abruptly before the first-ever cryptocurrency exploded through resistance at $7,300 all the way to $7,700 before it began to finally cool off.
Can bulls push Bitcoin higher and reclaim critical resistance as support once again, resulting in a rally leading up to Christmas? Or will bears swat down the attempt to break higher here, resulting in a not-so-happy holiday season for crypto investors?
Bitcoin Price Rockets to $7,700 in Sentiment Driven Short Squeeze
When Bitcoin was trading at lows below $4,000, sentiment was at extreme lows, with bearish crypto traders, analysts, and investors alike calling for even deeper lows, as low as $1,000 or more – essentially the complete demise of Bitcoin.
But Bitcoin exploded out of that range, resulting in a parabolic rally or echo bubble, that took the price of the most valuable cryptocurrency by market cap up 350% to a high of $14,000. At that point, crypto investors were once again talking about lambos, citadels, and riches beyond their wildest dreams, signaling irrational exuberance not witnessed since the crypto hype bubble in 2017.
Related Reading | Perceived Bitcoin Value Outpaced Peak Crypto Bubble Mania
Anytime sentiment reaches such extremes, assets tend to reverse. Such was the case once again today when the price of Bitcoin broke down to under $7,100. The entire market immediately became extremely bearish, and rightfully so – Bitcoin has been in a steady downtrend for months now, and recently retested former bear market lows around $6,500. Fear is back in the crypto market in a big way.
As short sellers piled on this morning expecting Bitcoin to once again set new, lower lows, the often contrarian market pushed higher, squeezing short-sellers out of their positions, forcing them to close positions and further drive up the price of Bitcoin.
The sentiment-driven short squeeze took Bitcoin price as high as $7,700, but bears were quick to push the price back down to $7,500, where Bitcoin must break above resistance to rally higher and have a chance of breakout out of the current downtrend.
Related Reading | Bah Humbug! If Bitcoin Bulls Can’t Reclaim $7,800 It’s Coal For Christmas
If Bitcoin can break above $7,500, it has a number of key resistance levels above it now from all the consolidation that has taken place over the last few months. Below here, Bitcoin could either fall to the low $6,000s, or potentially fall to $5,800, or even as low as $4,200 where the breakout into the April 2019 parabolic rally first occurred.
If support is found at any of these former resistance levels, Bitcoin’s bull market may not be over after all, and after the current correction finishes, could be off to the races once again. But it will take a much stronger push from bulls here into the holidays for Bitcoin’s current trend to reverse.
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