Bitcoin (BTC) has been trading sideways after its big move to the upside but investors are confused once again as to what its next defining move might be. The last time we had consolidation for this long; BTC/USD crashed hard below $6,000 and made a new yearly low. Cryptocurrency investors thus have good reason to be fearful of further decline at this point. That being said when something appears this obvious investors need to be more cautious. It is true that a lot of historical patterns and trends repeat over and over again in the trading history of most financial assets. However, we have to understand why something happened and in what circumstances it happened.
For instance, if we talk about consolidation, BTC/USD has consolidated many a time during its market cycles. Does this mean that every time the price consolidates during a bear market, we will see a move to the downside? Not at all especially when BTC/USD is this close to a bottom. The price consolidates when it cannot go up or down because there is a lack of momentum. It is consolidating again but the circumstances are the opposite of what they were back when the price was trading around $6,000. As most of you will remember, the sentiment around $6,000 was still overly bullish. Very few people expected the price to fall to $3,000 or lower levels. This was because $6,000 had been tested time and again and it had held strongly as a market structure.
However, when the price fell below $6,000 all hell broke loose and investors had no idea what the floor might be. That being said, the number of buy orders around $3,000 could be spotted from a mile away and it was clear that investors were hopeful that the price might stop around those levels.