Why do we say that this drop in Bitcoin may be a healthy backtest?

Bitcoin's recent price drop, exceeding 15% from February highs, is likely a healthy pullback after breaking the $73,835 resistance, consolidating gains and potentially paving the way for further growth to $150,000.

From the perspective of general market laws, when the asset price of the financial market dominated by human emotions often draws back when it breaks through the long-term resistance level, the purpose is to confirm the effectiveness of the breakthrough.

This phenomenon of "breakthrough and backtesting" is extremely common in the performance of various assets. Bitcoin broke through the key resistance level at $73,835 in November 2024, ending a months-long consolidation state, and this price decline is testing this key resistance to support.

This is like marching and fighting. After breaking through an important line of defense, you need to return to the army to consolidate your position and ensure the stability of subsequent advancement.

Investor behavior theory provides another explanation for Bitcoin's decline. According to prospect theory, traders tend to lock in profits quickly rather than letting returns continue to grow when they are in profitable state.

In the Bitcoin market, holders have been profiting near the $100,000 mark since December 2024. This behavior has led to a stagnation of the rise after the breakthrough to a certain extent, which has led to a backtest.

A large number of investors choose to leave after making a profit, which increases the selling price in the market and naturally faces downward pressure, forming the current downward trend.

Judging from the performance of Bitcoin price data, it has fallen more than 15% from its February high, falling below $80,000, approaching the support area of $73,835. If this support area can successfully stop the decline, it will be an excellent entry opportunity for investors who miss the initial uptrend.

These new investors will bring new buying power, triggering a price rebound. The price rebound will attract more investors to pay attention and buy, thereby creating conditions for brewing a larger rise. This is like a snowball rolling. The initial little force triggers the snowball to roll. As it continues to roll, the snowball will become bigger and bigger.

At the technical analysis level, the Bitcoin weekly chart shows a typical breakthrough backtest structure. Looking back on history, similar breakthrough backtesting has also occurred in the Bitcoin technology form in 2020 and 2023.

If Bitcoin can maintain the key support level of $73,835 this time, based on historical experience and the continuity of technical analysis, it may pave the way for the $150,000 target. Technical graphics are like the language of the market, telling the past and present of the market, and heralding possible future trends.

Although Bitcoin's decline showed a healthy backtesting feature in many aspects, the market is not completely predictable. Changes in macroeconomic policies will have a significant impact on the Bitcoin market. If there is a significant adjustment in the monetary policies of major economies around the world, or there is a major change in fiscal policies, it may change investors' expectations of the cryptocurrency market, and thus affect the Bitcoin price trend.

At the same time, market sentiment fluctuations should not be underestimated. Investors in the cryptocurrency market are more sensitive. A sudden positive or negative news may trigger a large fluctuation in market sentiment, resulting in unexpected changes in Bitcoin prices.