- Bitcoin fell through a rising wedge last night to hit $45,500
- Alts suffered a huge liquidation event, with $1.6 billion being lost as exchanges failed
- Bitcoin dominance is set for a jump, leading to chances to stack ammunition for another alt run in a few weeks’ time
Bitcoin collapsed through a rising wedge overnight, ushering in a billion-dollar liquidation event and causing several exchanges to stop functioning. Fortunately for bulls the only support that would have prevented a $10,000 correction held, leaving Bitcoin in a position to retake some dominance and try to crack $50,000 again.
Bitcoin Drops Through Rising Wedge
In failing to break $50,000 yesterday, falling just a couple of hundred dollars short on most exchanges, Bitcoin reinforced the rising wedge it had begun to construct six days ago, which it fell through overnight:
The Bitcoin price fell to $45,550 before a small rebound, reinforcing the notion that the Asia Monday morning session is typically a bloody affair.
With regard to where we go from here, the situation is pretty clear:
The support level off which Bitcoin bounced has acted as a good defence on three separate occasions, but it would be wise for Bitcoin not to test it again – the more times a trendline is tested the weaker it becomes as price clearly wants to go there. If that level does fall then there is no support whatsoever until $40,000, courtesy of the Tesla pump that boosted Bitcoin up to $48,000 last week.
At the other end of the scale if Bitcoin uses this flush as a chance to head higher, $50,000 is the obvious barrier to clear (prepare for headlines again), after which we have to use Fibonacci levels to see where the next resistance levels could be:
As we can see, should $50,000 break then $55,000 and then $62,500 are the areas of interest to us.
Exchanges Fail to Cope as $1.6 Billion is Liquidated
In a continuation of the worrying pattern we have seen in recent months, futures exchanges were unable to cope with the sudden influx of trades as Binance and FTX both went down, likely contributing to a mass liquidation event:
This is the largest liquidation event ever for nearly every defi name. Of the $1.6b in total liquidations, only 30% was $BTC. $AAVE, CRV, UNI, 1INCH, BAL, COMP, the list goes on. Most liqs ever. pic.twitter.com/dqqziTkMgv
— Larry (@TechnicalCrypto) February 15, 2021
It was becoming increasingly obvious towards the end of last week that alts were due a correction, as funding rates were incredibly high while Bitcoin dominance was reaching a key support level that has held since January 2018:
All this points to a potential Bitcoin rally to take its dominance back to the 68-70% level, reinforcing the notion we posited some weeks ago that alt seasons are getting shorter as Bitcoin dominance coils within a long term wedge:
If Bitcoin does move up from here as anticipated we should see $50,000 crack and potentially see a further move up to $60,000 in short order, especially with the increasingly bullish fundamental news coming out seemingly every day. In such a scenario alts would crash in BTC and would potentially see a dip in USD value, although another alt season would follow when Bitcoin hits the 70% dominance mark.