There is a possibility that the pair will drop for a while and then bounce back in the coming days.
Sell the BTC/USD and set a take-profit at 48,000.
Add a stop-loss at 51,000.
Timeline: 1-2 days.
Set a buy-stop at 50,000 and a take-profit at 52,000.
Add a stop-loss at 48,000.
The BTC/USD pair made a sharp reversal in the overnight session as demand for Bitcoin retreated. The pair is trading at 49,708, which is about 5% below the highest point on Monday. Other cryptocurrencies like Ether, XRP, and BNB have also retreated.
Bitcoin and other cryptocurrencies did well during the Christmas season. In the past few days, the coin’s price jumped to a multi-week high of above 51,000.
This rally happened as sentiment in the financial market improved as the Santa Claus rally got underway. In addition to Bitcoin, stocks also jumped, with the S&P 500 index rising to an all-time high on Monday.
The BTC/USD pair then made a sharp reversal in the overnight session as investors took profit considering that the price was up by about 22% from its lowest level this month. The decline also happened after Bitcoin managed to form a small double-top pattern.
Still, investors are reflecting on the year that was. Bitcoin has jumped by more than 100% this year and by more than 1,075% from the lowest level in 2020. The coin has gone mainstream as many retail and institutional investors have bought it.
This growth is mostly because of the actions of the Federal Reserve. In a bid to protect and supercharge the economy, the Fed decided to slash interest rates to zero. It also launched a major quantitative easing program that led added more than $4 trillion to its balance sheet.
Now, there are concerns about the new tone of the Fed. The bank has committed to increase the size of its asset tapering to $30 billion and to end the purchases altogether in March next year. It will also implement at least three rate hikes, which could affect the BTC/USD pair.
The four-hour chart shows that the BTC/USD pair made a sharp reversal in the overnight session. A closer look shows that this reversal happened after the pair made a small double-top pattern. It has now moved slightly below the chin of this pattern at around 49,500.
The pair has also moved slightly below the 25-day and 50-day moving averages. Also, the pair has completed the formation of the cup section of the cup and handle pattern.
Therefore, there is a possibility that the pair will drop for a while and then bounce back in the coming days.