The price of Bitcoin (BTC) dropped sharply after approaching $18,500 on Binance and Coinbase. The plunge took place as large sell orders were spotted on both spot and futures exchanges. As Cointelegraph previously reported, traders anticipated a pullback as the price of BTC neared the $18,000 to $19,000 resistance zone. Upon its first retest of the area in nearly three years, the market saw a strong reaction.
Bitcoin confirms $18.5k as a key near-term resistance area. There are two main reasons why Bitcoin saw a swift drop near $18,500, and this caused other cryptocurrencies like Ether (ETH) to correct even harder.
First, the $18,500 level remains the biggest resistance level before a new all-time high above $20,000. Hence, it is a key area of interest for sellers to defend, as breaching $18,500 would raise the chances of a broader rally.
Second, an overwhelming majority of Bitcoin addresses are profitable as BTC tests an important resistance area. According to IntoTheBlock, 99% of BTC addresses are now in a state of profit. This raises the probability of a profit-taking-induced pullback.
There is a high probability that dips would get aggressively bought, based on BTC’s recovery in the past two hours. Following the initial drop to $17,214 on Binance, Bitcoin immediately recovered above $17,600.
The hourly chart of Bitcoin shows that the 20-day moving average (MA) hovers at $17,586. As such, if BTC remains comfortably above that level, the likelihood of a prolonged recovery increases.
Dan Tapiero, the co-founder of 10T Holdings, expressed confidence in Bitcoin’s medium-term outlook. He said that the “big boys” or the smart money would likely buy the dips. Referring to the weekly chart of Bitcoin, he wrote:
“Not often in life do you get to look at a chart like this one. #Bitcoin to slice through highs imminently. 3rd wave up to dwarf the 2017 move and should persist for several years. Real fundamentals driving price unlike ’17 speccy/ico retail flow. Big boys will buy dips now.”
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