Bitcoin price triggered its first run-up in January as it inflated 41% in the first three weeks. This move was followed by a power struggle between the bulls and bears, which led to a sideways movement and a deep pullback into the inefficiency, extending from $17,181 to 20,388. This inefficiency is termed a Fair Value Gap (FVG) and was created on the weekly timeframe as there was an excess of bullish momentum from investors. Thus, this FVG is also known as the buy-side imbalance.

While Bitcoin price action has scaled new monthly highs, investors should note that the successive higher highs created since mid-January do not align with the Relative Strength Index (RSI) and Awesome Oscillator (AO) momentum indicators which denote a declining strength from the buy side.

This non-conformity reveals the development of a bearish divergence, which results in either a small pullback or a deep correction.

So a capital inflow into Bitcoin could be the main reason for this rally. Hence, the bearish divergence could be a buying opportunity, provided BTC holds above the $21,405 support level. If successful, the next target for the pioneer crypto would be the upper limit of the sell-side inefficiency, stretching from $26,877 to $29,220.

However, a decisive flip of the $21,405 support level in a three-day chart would invalidate the bullish thesis for BTC. Such a development would trigger a deep correction for Bitcoin price that rebalances the buy-side imbalance, extending from $17,181 to $20,386.

Sellers could take this pullback to the next level and drive Bitcoin price lower to sweep the sell-side liquidity below equal lows at $15,462

Bitcoin to expand and extend its correction

Mar 19 2023