Bitcoin price analysis for February 15-21: the coin could correct to $40,000 this week

A lack of momentum in the short-term could attract profit-booking, which may pull the price below $40,000

The biggest news in the crypto universe last week was Tesla’s announcement of their purchase of $1.5bn worth of Bitcoin. In a filing with the US Securities and Exchange Commission (SEC), the company said the purchase was made to bring greater flexibility and maximise returns on the cash reserves. 

Along with buying Bitcoin, the automaker also announced that it will start accepting Bitcoin payments for its cars “subject to applicable laws and initially on a limited basis.” And, like other merchants, Tesla does not plan to convert Bitcoin to fiat currencies immediately on receipt but may add it to its reserves.

In another positive for the crypto sector, Bloomberg News said that Morgan Stanley’s Counterpoint Global fund, with $150bn in assets under management, is exploring the possibility of investing in Bitcoin. 

Along similar lines, JPMorgan co-president Daniel Pinto said that if other asset managers and investors adopt Bitcoin, then the investment bank will also have to get involved. However, Pinto said that currently the demand was not strong enough but he expects a pick up in the future.

Gradually, institutional investors are warming up to the idea that they cannot ignore cryptocurrencies as an asset class. This will ensure that the demand remains high and may act as a safety net during the next correction.

Let’s do the Bitcoin price trend analysis of the weekly chart to ascertain the next possible move.

Bitcoin price technical analysis: weekly chart

Bitcoin skyrocketed above the $42,036.45 overhead resistance and hit a new all-time high at $49,718 last week. The largest cryptocurrency rallied 25.11 per cent and closed the week at $48,647.50.

A new all-time high is a sign of strength but the relative strength index (RSI) is showing the first signs of forming a negative divergence. 

If the bulls do not push the price above the psychological resistance at $50,000, several momentum traders may be tempted to book profits. If that happens, the BTC/USD pair may correct to $42,036.45.

This is an important support to keep an eye on because if the price slips below this support, the correction could deepen to the 38.2 per cent Fibonacci retracement at $34,485.23 and then to the 20-week EMA.

Conversely, if the price rebounds off $42,036.45, the bulls will again try to resume the uptrend by propelling the price above $50,000. If they succeed, the rally could extend to $60,800.

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The Bitcoin price weekly analysis shows that the trend favours the bulls, but the bears are trying to defend the $50,000 overhead resistance. Let’s perform the BTC price analysis of the daily chart to see if it has formed any bullish or bearish setups.

Bitcoin price technical analysis: daily chart

Bitcoin could not pick up momentum following the sharp up-move on February 8. This shows a lack of demand at higher levels. If the bears sink the price below $43,730.45, the pair could drop to the 20-day EMA.

In an uptrend, the bulls usually buy the dips to the 20-day EMA. A strong rebound off this support will suggest that the uptrend remains strong and the bulls are accumulating on dips. The uptrend will resume on a breakout and close above $50,000.

On the other hand, if the pair dips below the 20-day EMA, it will be the first sign of weakness. Such a move will suggest that traders are booking profits aggressively. That could pull the price down to the 50-day SMA.

A break below the 50-day SMA will indicate a trend change. The pair could then drop to the support at $33,862.50. 

How to trade Bitcoin this week

Bitcoin surged on February 8 and that could have immensely benefited the traders who had been holding their long positions. Traders may now consider booking profits on their long positions because the weakening momentum increases the possibility of a correction.

Short-term traders may buy the dip to the 20-day EMA on a strong rebound, but the positional traders could stay on the sidelines for a few days.

Trade Bitcoin to US Dollar - BTC/USD chart

Bitcoin to US Dollar
Daily change
Low: 17087.2
High: 17255.6

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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