Will Bitcoin's $25,000 support hold? Opportunity or decline?

Jatin255

On September 11th, the cryptocurrency market experienced a sharp decline, with the largest cryptocurrency, Bitcoin (BTC), falling below the support range of $25,500 to $26,500 and briefly dropping below $25,000 to a low of $24,950. It recorded a daily decrease of nearly 2.4% and was trading at $25,800 at the time of writing.

The second-largest cryptocurrency by market capitalization, Ethereum (ETH), suffered a more significant decline. It fell below the $1,550 support level, reaching a low of $1,530, and recorded a daily decrease of nearly 3.8%. At the time of writing, it was trading at $1,830.

Is this a sign of opportunity or an impending disaster?
The recent downturn can be attributed to two main reasons. First, the upcoming release of the U.S. Consumer Price Index (CPI) tends to lead to a downturn in the market as observed in the past before the release of significant data. Second, the bankruptcy exchange FTX's plan to sell, pledge, and hedge cryptocurrencies worth $3 billion to return funds to creditors may also be a significant factor affecting the market's decline.

As for whether this downturn is an opportunity for bulls or a prelude to disaster for bears, Bitcoin's drop to $25,000 may cause panic selling among many investors. However, it also provides a short-term buying opportunity at a lower price for buyers. This current market trend appears to be more like a "seller trap." As I have mentioned before, both rising and falling prices can be good news. What is most concerning is a sideways market. A drop can present an excellent opportunity for us to enter.

Looking at the subsequent 2.3% rebound in Bitcoin, the analysis of a "bear trap" appears to be accurate, and the global market's price movements along with on-chain indicators touching historical lows continue to bring a bullish trend.

The decline in the U.S. Dollar Index and low market liquidity
From the perspective of U.S. stocks and the U.S. Dollar Index (DXY) on September 11th, the S&P 500 and Nasdaq stock market indices simultaneously rose. Meanwhile, the U.S. Dollar Index (DXY) approached the high end of the range near 104.8 points under the Federal Reserve's (FED) tightening monetary policy. This suggests that the U.S. Dollar Index may experience a bearish reversal in the near future.

Historically, Bitcoin often correlates positively with U.S. stocks and inversely with the U.S. Dollar Index. This means that if U.S. stocks continue to rise and the U.S. Dollar Index reverses as expected, it is likely to drive the next upward trend in Bitcoin.

Over the past few weeks, Bitcoin's price decline has led to low market liquidity and trading volume. Various indicators, including volatility, liquidity, trading volume, and on-chain settlement volume, have reached historical lows. Bullish speculation has cooled down, and market sentiment is leaning towards indifference, exhaustion, or even boredom.

Historically, if Bitcoin were to reverse its bullish trend at this point, especially when the bullish reversal occurs near the short-term buyer breakeven level of $26,000, it could attract a significant number of buyers to enter the market.

In summary, the price trend of the U.S. Dollar Index and on-chain data suggests that buyers may return earlier than expected, making the current downturn potentially a good opportunity for bulls to increase their positions.