Bitcoin (BTC) continues to show its strength with multiple attempts to breach $ 16,000 on November 12th.
The annual high is more than 300% higher than the annual low of $ 3,800 in March. This is an impressive boost, especially as life slips out of cryptocurrencies.
Even Stan Druckenmiller admitted this week that he bought Bitcoin in hopes that Bitcoin will continue to outpace gold. This is another large institutional investor who has jumped on digital gold.
However, is it justified to continue rising in light of this euphoria? The fear and greed index is at an all time high, making the correction almost inevitable in the short term.
Bitcoin is trying to get into the sixth weekly green candle in a row
BTC / USDT weekly chart. Source: TradingView
Bitcoin’s weekly chart shows an area of visible resistance around $ 16,000. This level was first reached nearly three years ago. At that time, the Bitcoin price was rejected at around $ 16,000.
Additionally, a sixth weekly green light is currently being printed, which is definitely a bullish signal.
However, many levels are not tested below the current price on the weekly timeframe. The healthy way to build a new cycle is to test past resistance levels as new support areas.
For example, this review was not conducted in the $ 12,000 region. Therefore, this is the level that traders should pay attention to as it could become a critical reversal zone.
A possible bearish divergence on the daily chart
The daily chart shows a potential break above $ 15,600. Such a volcanic eruption is likely to occur with a large volume, indicating a greater intensity.
However, the current rally lacks volume, creating a potential bearish divergence and building a top at that level.
That is why, if Bitcoin drops south and drops to $ 15,600, a further correction appears inevitable.
In the event of a further correction, the levels you need to watch in the daily timeframe will be $ 14,100, $ 13,100, and $ 11,600 to the $ 12,000 region. The latter is also a potential support area on the weekly chart.
The fear and greed index remains at an all time high
The fear and greed index remains very high, with the current level at 87 out of 100, the highest level since June 2019, which marks the height of the previous bullish cycle.
The fear and greed index is a useful tool for measuring market sentiment.
When it reaches the highs of 80 and above, a correction becomes more likely than a continuation of the uptrend. This euphoria is often short-lived as the market often moves in the opposite direction than most traders expect.
While institutions delving into bitcoins or prominent investors claiming to own BTC are very optimistic signals for the market as a whole, this does not mean that a correction is not possible. In fact, these bullish cycle corrections are favorable for the bitcoin market.
In the previous bull market cycle in 2017, the bitcoin / US dollar exchange rate fell several times by 30%, which led to a revision of previous resistance levels, which later became the starting point for the next rally.