In a recent video released on December 21, renowned crypto analyst Rekt Capital explored the pressing question: “What’s the worst-case scenario for Bitcoin right now?” Following a surge to an unprecedented high of $108,374 on December 17, Bitcoin’s value has seen a notable decline, dropping over 11% since.
How Low Can Bitcoin’s Price Drop?
Rekt Capital approached the current Bitcoin price correction with a historical lens, emphasizing the significance of the 6th, 7th, and 8th weeks in a “price discovery uptrend.” Analyzing previous cycles such as those in 2013, 2016–2017, and 2021, he highlighted Bitcoin’s pattern of experiencing corrections during these periods. Some historical dips have been as severe as 34% or more.
“Understanding these weeks is crucial because they tend to be problematic for Bitcoin,” stated Rekt Capital. He referred to past cycles where significant downturns occurred within this timeframe. Notably, during the 2013 cycle’s 7th week, Bitcoin endured a dramatic 75% pullback over 13 weeks. Similarly, in the 2016-2017 period, a 34% decline was observed in the 8th week, underscoring the recurring vulnerability during these specific weeks.
Current Cycle and Critical Support Levels
As of the current cycle, Bitcoin has seen a retracement exceeding 10%, positioning its price within a historically crucial support zone at $96,537 on the weekly chart. Rekt Capital stressed the importance of this support level, remarking, “This area of historical support has enabled the move to $108,000.” He warned that failing to maintain this support could lead to a sharper correction down to $89,830.
Analyzing recent price movements, Rekt Capital highlighted the formation of a bearish engulfing candle on the weekly timeframe. This technical indicator is often linked with potential reversals. “We’re losing resistances that turned into support,” he noted. Such a loss indicates a possible shift into a corrective phase as the price struggles to sustain its upward momentum.
Technical Indicators and Market Trends
Rekt Capital also emphasized the importance of upholding the 5-week technical line in his analysis. He cautioned, “If we lose this 5-week technical uptrend and the orange trend line, it would be mounting evidence that we might be transitioning into a corrective period.”
Furthermore, he addressed the unfilled CME gap between the $78,000 and $80,000 price levels, a crucial zone that remains unoccupied. “Delving into 26%, 27%, 28% dips could fill the entire CME gap,” Rekt Capital remarked. Historically, CME gaps tend to get filled, although a few remain unfilled.
Long-Term Optimism Amid Short-Term Challenges
Despite the cautionary signals, Rekt Capital maintains a bullish long-term outlook. He explained, “These pullbacks are what enable future uptrends in the parabolic phase of the cycle.” Drawing from previous cycles, he illustrated how corrections have historically provided the necessary “breather” for the market.
For instance, in the 2021 cycle, Bitcoin experienced a 16% pullback in the 6th week and an 8% dip in the 8th week, yet the overall trend continued upward. Similarly, the current 10% retracement, while significant, could serve as a preparatory phase for the next leg of price discovery.
At the time of writing, BTC is trading at $95,000, reflecting the ongoing market dynamics and investor sentiment.
As the crypto market continues to evolve, keeping an eye on these historical patterns and technical indicators can provide valuable insights into potential future movements of Bitcoin’s price.
