Bitcoin edges towards major $2,000 correction

Bitcoin has continued its four-week downtrend after a further 2.5% slump this morning, with a $2,000 move to the downside becoming increasingly likely.

The $7,900 level of support is now being tested for the first time since October 23. A breakdown from this level could pave the way for a cataclysmic correction to the historic $5,900 level of support.

The next logical stopping point for Bitcoin, if $7,900 is indeed broken to the downside, would be $7,400, which is the same level that spurred a 40% rally to the upside on October 25.

However, lightning doesn’t usually strike twice in terms of Bitcoin’s price action, and a decline to $7,400 would almost certainly result in a prolonged move down to the $6,000 region.

If price stays below $8,000 for the next two days, the daily chart death cross will come to fruition, which has the potential to drive price all the way down to yearly lows.

The exponential moving average death cross has happened just twice since 2014, and on both occasions it caused respective 61% and 72% corrections.

However, if Bitcoin can defy all odds and rally from the $7,900 level, it could narrowly avoid the death cross for the second time in a month – although price would need to exceed $8,800 for it to be invalidated.

Bitcoin is now 24.16% down from October’s high of $10,350 and 43% down from the yearly high in June.

Since reaching $14,000 in June, Bitcoin has made four clear lower highs that demonstrate a bear market reversal and a significant downtrend.

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