Bitcoin (BTC) Price Action Kicks Off the Week with Heightened Volatility

Bitcoin's price action has kicked off the week with heightened volatility as market participants brace for key support tests.

Bitcoin (BTC) price action kicked off the week with heightened volatility as market participants kept an eye on key support tests.

As Arthur Hayes, co-founder of BitMEX, pointed out, $78,000 appeared to be a critical level for the cryptocurrency. If this support fails, then $75,000 could be next in the crosshairs.

An ugly start to the week. Looks like BTC will retest $78k. If it fails, $75k is next in the crosshairs. There are a lot of options OI struck $70-$75k, if we get into that range it will be violent.

Of course, this is assuming the price doesn’t rally from here and begins testing the lower levels of support.

The potential for a breakdown into the $70,000-$75,000 open interest (OI) ranges in options contracts could also generate some quick price oscillations.

The market chatter denotes that BTC failed to hold onto its latest peaks. Having touched on the fringes of record levels, the cryptocurrency is now showing signs of wear as it threatens to drop into a deeper correction.

The crucial question remains: will BTC manage to stay above the recognized support levels? If so, then the market might continue on a bullish trajectory. However, if the cryptocurrency slides below these support levels, it could spell doom for the bull market and set the stage for a more prolonged correction.

Market Uncertainty Grows As Bitcoin Approaches $77K Test

A closer look at the technical levels reveals that Bitcoin is retesting the 1W50EMA, a very important historical moving average that acts as a border between the bull market and the bear market. Bitcoin can maintain its bullish stance if it holds above it. Multiple retests with no bounce, however, might indicate a bigger correction.

At the same time, Bitcoin dominance is also increasing, moving towards 63%-64%, which in turn applies pressure on the altcoin market. As we know, when Bitcoin becomes more dominant, it usually bodes poorly for other coins. This is also happening now, with the altcoins dumping while Bitcoin is seen consolidating.

As such, participants are divided over whether the current movement in Bitcoin signals the beginning of a bear phase. While some note that structural support still remains, others believe that a slow drip followed by a rapid capitulation could potentially lead BTC to the bottom levels.

The price action at $77,000 in the future will be a turning point in determining the direction of the market.

Potential Fakeout Before A Retest

The liquidity environment provides us with more information about the short-term direction of Bitcoin. The liquidation levels in the order book at $77,000 suggest that a significant reaction out of this area will decide the next direction. The liquidity clusters in the order book at $82,000 and $80,000 suggest that there is still a bit of room for movement higher before any significant downside movement takes hold.

One of the scenarios that the traders are exploring is a gradual increase followed by a false breakout before Bitcoin retests the lower levels. The pattern that we have experienced in the past cycles can lead to a sharp retest at $77,000 before a bounce.

If Bitcoin can manage to hold onto this level of support, it can confirm the bullish thesis and set the stage for the next leg higher.

If not, however, then more downside towards $75,000 and potentially higher becomes increasingly likely.