Bitcoin (BTC) has been on a dumping spree the past48 hours. Investors and traders have been busy panic selling to strong hands that anticipated the final capitulation a long time ago. The unfortunate reality is that to most retail traders, Bitcoin (BTC) appeared to have been in a free fall after it broke the critical $5,800 level. After yesterday’s sell off, most of them were looking for a bounce to sell into. When that bounce did not occur, they kept panic selling during today’s sell off. It might appear as though Bitcoin (BTC) broke the support and violated all technical analysis and entered a free fall. However, I assure you that did not happen. If we look closely at the BTC/USD daily chart we can see that Bitcoin (BTC) settled around the $4,200 level.

This level is a strong resistance turned support zone and is extremely unlikely to be broken. As we can see on the chart, the price did bounce off very strongly from that level. However, in the moment, it did not seem that way. The bearish momentum was so strong that a lot of retail traders fell for it. The reason I say fell for it is because this was absolutely no time to sell. If you did not sell Bitcoin (BTC) above $6,000 in anticipation of a capitulation, it would be a mistake to sell in the middle of the sell off because you might very well have had to pay to get into the market again. So far, Bitcoin (BTC) has done what it has done before i.e. break market structure and form a final wave of capitulation. The bullish resolve is now completely obliterated.

It was a good sign to see the price bounce near the $4,200 level corresponding to the previous resistance turned support. It confirms our opinion that the capitulation should come to an end around the previous resistance. That being said, it is still inadvisable to entered leveraged positions at current levels. The thing with bullish and bearish moves in a nascent and unregulated market like this is that it may take time to move up, but it does not take time to move down. People easily give in to fear more than they give in to greed. Only a small minority in the market keeps a level head without being influenced by short term tricks. So, not only must one be wary of the weak hands lurking around, but also be on the lookout for any manipulation.

The time to expect a market recovery is when a sentiment reaches an extreme level. During a bull market, when the bulls become too confident, it is a strong sign to start looking for the exits. Similarly, during the bear market, when the bears become too confident, it is a strong sign to start looking for entries. The above 1H chart for BTCUSDShorts shows how confident the bears have become over the past few days. Bitcoin (BTC) bears that were recently considered dead have once again become loud. In fact, the continuous sell off made them confident to such an extent that we have now seen the number of shorts run into a historical resistance. This means that during the next few hours or days, we should see a strong decline in the number of shorts which might translate into some quick jumps on BTC/USD. The whales with their manipulation make money at both the top and the bottom of the market. However, retail traders that falsely assume that they can smart the market short term always end up paying the price with their own hard earned money.