In a recent video shared on December 21, crypto analyst Rekt Capital tackled the pressing concern: What’s the worst-case scenario for Bitcoin right now? After hitting a staggering all-time high of $108,374 on December 17, Bitcoin has since experienced a notable decline, dropping over 11%.
Examining Bitcoin’s Potential Lower Bound
Rekt Capital provided a historical perspective on this Bitcoin price pullback, highlighting the critical weeks 6, 7, and 8 during price discovery uptrends. Drawing parallels from previous cycles in 2013, 2016–2017, and 2021, he pointed out that Bitcoin often experiences significant corrections during these periods, with dips sometimes exceeding 34%.
Understanding these weeks is crucial, Rekt stated. He recalled how, for example, in week 7 of the 2013 cycle, Bitcoin faced a staggering 75% pullback over the course of 13 weeks. The 2016-2017 cycle also saw 34% drop in week 8, clearly illustrating this recurring vulnerability.
Current Support Levels
As we analyze the current cycle, Bitcoin has recently retraced over 10%, landing within a historically significant support zone of $96,537 on the weekly chart. Rekt emphasized the importance of this support level, stating that “this area of historical support has enabled the move to $108,000.” He cautioned that if Bitcoin fails to maintain this level, we could see a more drastic correction down to $89,830.
Bearish Indicators
Looking at recent price action, Rekt pointed out the emergence of a bearish engulfing candle in the weekly timeframe, which is often a warning sign for potential reversals. “We’re losing resistances that turned into support,” he observed, indicating a possible shift into a corrective phase as the price struggles to maintain its upward momentum.
Furthermore, he underscored the importance of keeping the 5-week technical line intact. He warned, “If we lose this 5-week technical uptrend and the orange trend line, it could signal a transition into a corrective phase.”
Unfilled CME Gaps
Rekt also noted the significance of the CME gap between the $78,000 and $80,000 ranges, an area that currently remains unfilled. “Exploring 26%, 27%, or even 28% dips could potentially fill this entire CME gap,” he indicated, recalling that historically, CME gaps have tended to be closed over time, although some gaps have inexplicably remained.
Long-term Outlook
Despite these cautions, Rekt Capital maintains a bullish outlook for Bitcoin in the long haul. He argued that “these pullbacks are what enable future uptrends in the parabolic phase of the cycle.” He illustrated with examples from previous cycles, where corrections provided necessary breathers for the market. In 2021, Bitcoin saw a 16% pullback in week 6, and an 8% dip in week 8, yet the overall trend remained upward. The current 10% retracement, while significant, might simply serve as a preparatory phase for the next leg of price discovery.
As of now, Bitcoin is trading at approximately $95,000.
