$25,000 must hold to avoid a major decline in BTC

Bitcoin has been under pressure since mid-April when it came down from the recent highs north of $30,000. Bitcoin is currently trading at $25,950, right above a historically significant support level. So, the question becomes will Bitcoin pivot at the logical price level of $25,000, and if it can’t how far could it fall?

While $25k is a likely candidate for a reversal the technical data is not clearly pointing to the upside nor the downside as the likely path forward. With $25K being the most logical place to find support. The history of support and resistance at $25k goes back to the flash crash of May 2022 when Bitcoin fell $3,500 from $28,500 intra-day only to recover and close basically unchanged on the day. Now despite what you might think based on the last few months Bitcoin has been in a bear market since November 2021. However, there have been three short-lived counter-trend rallies since that flash crash in May 2022. It just so happens that two of those brief corrective (counter) waves concluded precisely at $25,000. 

Of the three rallies only the most recent run to $30,000 made it above $25,000. Doing a simple Fibonacci retracement of this rally we can identify $25,300 as a 50% retracement level. The previous run-up corrected 61.8% which is a normal yet deep correction.

Not only was the correction deep on the prior two run-ups but they were fiercely quick as well. We have not seen any of that sort of swift drop this time around and since Bitcoin has this history of such rapid declines a break below the support of $25,000 would be where it might occur. Other technical indicators also hint at a price drop such as falling below the 200-week simple moving average for the third time in the last 12 months. The two prior occurrences in June and August of 2022 were followed by steep declines, although this indicator used to be a reliable bottoming signal. 

So, if we do fall below $25k where could we expect support to come in? Either $23,900 but more likely $22,000. As such traders should be watching this level closely and look to enter a short position on the breach of $25k or a long position on the less likely chance of a bounce off that same level.