Bitcoin price analysis for December 21-27: the coin could correct to $20,000 in the short term

Bitcoin is overbought both on the short-term and the long-term charts, which could start a minor correction or consolidation in the next few days

One River Digital Asset Management recently revealed a $600m position in Bitcoin and Ethereum. The hedge fund said it aims to increase the current position to about $1bn by the first half of next year.

In another purchase by an institutional investor, Christopher Wood, global head of equity strategy at Jefferies, sold five per cent of his physical gold and invested that money in Bitcoin. Wood added that if Bitcoin’s price were to correct, he would add more. This shows that some institutional investors have started to believe that Bitcoin is a better bet than gold.

The institutional interest can be gauged from the fact that Bitcoin was the third most crowded trade in a Global Fund Manager Survey conducted by Bank of America Merrill Lynch.

Several analysts have projected ambitious targets for Bitcoin next year. Instead of getting carried away by these bullish projections, traders should keep their risk under control while investing because the crypto markets can turn in a jiffy.

Can Bitcoin extend its uptrend or will it succumb to profit-booking? Let’s do the Bitcoin price trend analysis of the weekly chart to find out.

Bitcoin price technical analysis: weekly chart

Bitcoin is in an uptrend and it picked up momentum after breaking above the $20,000 psychological barrier. The biggest cryptocurrency surged 22.53 per cent to end the week at $23,478.75. 

This sharp up-move has pushed the RSI above 88 levels, which suggests that the BTC/USD pair is overbought in the short term and could enter a correction or a few weeks of consolidation.

The next pullback is likely to retest the $20,000 breakout level. A strong rebound off this support will suggest that the bulls are buying on dips to this support. This level could then act as the launching pad for the next leg of the upward move. If the bulls push the price above $25,000 the pair could rally to $30,000. 

Contrary to this assumption, if bears sink the price below $20,000 the pair could drop to the 20-week EMA. A strong bounce off this level will keep the uptrend alive but a break below it will suggest a deeper correction or a few weeks of range-bound action.

The Bitcoin price weekly analysis shows that the rally is overextended in the short term and a pullback is likely. Let’s do the BTC price analysis of the daily chart to see if it also projects a similar view.

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Bitcoin price technical analysis: daily chart

Bitcoin soared above $20,000 on December 16 and hit a new all-time high at $24,311.95 on December 20. The sharp up-move in a short time suggests that traders who were sitting on the sidelines and the momentum traders have jumped in.

While the rising moving averages suggest that bulls are in command, the RSI is in the early stages of forming a negative divergence. This suggests that the momentum may be weakening.

The first support on the downside is the 20-day EMA and then the psychological level at $20,000. 

If both these levels crack, the next major support to watch on the downside is the 50-day SMA. A break below this level will suggest that the uptrend has ended in the short term.

How to trade Bitcoin this week

Traders who acted on the suggestion given in an earlier analysis are sitting on huge gains in a short time. As Bitcoin is overbought both on the daily and weekly charts, traders could consider booking profits or may tighten the stops.

On the downside, a strong rebound off the $20,000 level may offer a short term buying opportunity. Traders may wait for the bounce to happen and then try to buy on the way up instead of buying in a falling market.

Bitcoin to US Dollar
Daily change
17112.2
Low: 17084
High: 17253.2

FURTHER READING: Bitcoin explained simply: everything you need to know

FURTHER READING: Bitcoin vs Bitcoin Cash vs Bitcoin SV: the ultimate guide

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