News summary:

• Analyst who foresaw the recent fall of Bitcoin warns that the current bullish cycle of cryptocurrencies could have come to an end.

• The resumption of the uptrend depends on Bitcoin breaking the strong resistance in the $124,000 to $126,000 range.

• $84,000 is the line in the sand for the price of Bitcoin.

Two weeks ago, Crypto Investidor analyst Arthur Driessen claimed that Bitcoin’s rise toward $126,000 could be a typical “bull trap,” and that’s exactly what happened. The prediction was confirmed with the 19% drop in the price of Bitcoin (BTC) relative to its all-time highs last Friday, October 10.

Now, the analyst warns that the fall could have been the initial stage of a new bear market for cryptocurrencies.

Although it was boosted by the liquidation of more than 19 billion dollars in a single day (a value greater than that of the “Covid crash” and the bankruptcy of FTX), the magnitude of the correction was not surprising or absolutely atypical for bull markets.

Murilo Cortina, director of new businesses at QR Asset, stated in the manager’s weekly market analysis bulletin that Bitcoin was already losing strength after reaching its new all-time high on October 6 in a consolidation movement around $122,000.

A publication by the President of the United States, Donald Trump, in the final hours of Friday the 10th, when the US stock market was heading towards closing, was enough to trigger a brutal correction in the crypto market:

“The announcement of 100% tariffs on Chinese imports triggered a risk-on flash squeeze and BTC plummeted from around $122,000 to lows near $104,000 to $107,000 within hours, before closing the day around $113,000.”

Cortina emphasizes that the massive sell-off in derivatives markets was not caused by Trump’s rally alone. The movement was boosted by “price decoupling”, that is, the abrupt difference in quotes of the same asset between different exchanges, amid investor panic.

At the height of the crisis, the correlation between the BTC/USD and BTC/USDT pairs (normally maintained by arbitrage trades) did not hold. “They arose spreads of thousands of dollars between the main exchanges, and extreme quotes on platforms with less liquidity,” explained Cortina.

The loss of parity in assets used as collateral in margin operations and yield products amplified the downward spiral, as the analyst explained:

“With collateral marking lower, margin triggers were activated, causing new forced sales. This negatively impacted prices, deepening the loss of parity.”

In this context, altcoins Medium and small market caps fell between 40% and 70%, depending on the platform. Despite the turbulence generated by the event, the market reaction was typical of moments of great deleveraging, says Cortina:

“Partial stabilization of the benchmarksfunding rate returning to neutrality, open interest below previous peaks and a less stretched position base.”

With Trump’s retreat in relation to China and the maintenance of expectations of interest rate cuts in the US at the next meeting of the Federal Open Market Committee (FOMC) on the 29th, the market maintains a positive bias, according to QR Asset.

Bitcoin price analysis

Although the price of Bitcoin has stabilized around $115,000 with a rapid recovery after last week’s decline, the resumption of the uptrend depends on the break of the resistance established between $124,000 and $126,000, says Arthur Driessen.

The Crypto Investidor analyst highlights that the price of Bitcoin has already been rejected three times in that region. Should the breakout be confirmed, the next bullish targets are between $149,000 and $164,000, Driessen says.

In a pessimistic scenario, “the recent movement could have signaled the peak of the current cycle, and last Friday’s fall could have been the initial trigger for a deeper correction,” according to the analyst.

If Bitcoin is again traded below $84,000, the lows recorded in the last upward movement, a bearish pivot will be confirmed, highlights Driessen:

“This structure would project targets in the region of $82,000 to $83,000, representing a downward wave 3 within a larger corrective process.”

This formation would signal the beginning of a new bear market, with bottom targets projected between $50,000 and $60,000, according to the chart below, the analyst concludes.

As reported by Cointelegraph, traders and analysts are divided on the direction of the market: while some claim that a new bear market is underway, others believe that the recent drop was an opportunity for investors to open new positions at lower prices.

Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investments and commercial movements involve risks and it is the responsibility of each person to do their due research before making an investment decision.