The price of bitcoin had dropped dangerously close to the 2017 cycle peak on Wednesday. It was a brutal decline for investors who watched their BTC portfolios incur losses after losses. Speculations were rampant in the space on what a touch below $20,000 would have meant for the market. The implications were abundant in their impact but the recovery back above $21,000 has staved off the bears, if only for a little while.
After the market recovery on Wednesday, it has become apparent that there has been some intervention in the market crash. With bitcoin in the $20,000 level, many had resigned to the fate that there would be no respite until the 2017 high levels were broken. If this had happened, it would have marked a first-of-its-kind event in the history of bitcoin where the digital asset had always managed to never trade below previous cycle peaks.
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As such, significant support forming right above $20,000 has restored some hope in the market that this would be the bottom. So far, this theory has managed to hold as bitcoin has turned back into the green for the first time since the crash began.
More importantly, though is the fact that the recovery has not been significant by any measure. The digital asset still remains well below its 20-day moving average, a sign that bears can easily take hold once more.
However, bitcoin is said to be at oversold levels. So, the market expects to see fatigue in the sell-offs that have been rocking the digital asset. A slowdown would definitely be good for bitcoin but it would need to see more recovery to ensure this.
The $20,000 level is important for bitcoin to hold for a number of reasons. One of the most major of these are the MicroStrategy bitcoin-backed loans. The way these loans are structured leave open a margin call opportunity if BTC to fall below its previous peak cycle. And although CEO Michael Saylor has assured the market that the firm has more collateral to put towards its loan to avoid a margin call disaster, it remains a very real possibility.
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Another implication is the Celsius liquidity levels. Now, the first is said to have paid off some of its loans which had pushed its liquidation price back to $14,000 but a break below $20,000 shows no significant support and would quickly see the lending protocol liquidated.
Last but not least is the fact that bitcoin at $20,000 represents an important technical and psychological level. Given that the majority of BTC-denominated open interest are all at the $20,000 level, a break below this would see renewed sell-offs from investors.
The only major support after this level is at $16,000, after which, it falls to $14,000, the Celsius liquidation price. However, if bitcoin is able to recover above $25,000 by the end of the week, a test of the $29,000 resistance point would quickly follow.
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