Meanwhile, Bitcoin’s 43% rebound in January improved sentiment among small investors. Analytics firm Crypto Santiment said the number of Bitcoin addresses containing 0.1 BTC or less rose by 620,000 to 39.8 million, the highest level since November 19.

Daily cryptocurrency market performance. Source: Coin360
With sentiment turning positive, traders usually buy dips as they expect the uptrend to continue. However, some analysts believe that dip buyers will be trapped and bitcoin could drop to the $19,000-$21,000 support zone or worse, witness a capitulation in the next few weeks.

Could the S&P 500 and Cryptocurrency Markets See Profit-Taking in the Short Term? What are the critical support levels to watch out for? Let’s study the graphs to find out.

The S&P 500 rose above the 4101 resistance on February 1 but the bears are unlikely to surrender without a fight. They will try to pull the price back above 4101 and trap the aggressive bulls.

SPX daily chart. Source: TradingView
It is the bulls’ responsibility to protect the area between 4101 and the 20-day exponential moving average (4033). If the price bounces off this area, the possibility of a break above 4200 increases. That could pave the way for a potential rally to 4300 where the bears may erect a strong barrier again.

On the downside, the 20-day exponential moving average is the crucial support to watch. A break and close below would indicate that the bulls may lose their grip, putting the indicator at risk of falling to the uptrend line.

The US Dollar Index made a strong comeback on February 2, indicating strong buying on dips. The buyers maintained their momentum and pushed the price above the 20-day moving average (102) on February 3rd.

DXY daily chart. Source: TradingView
The indicator could rise to the resistance line of an expanding falling wedge pattern as the bears will try to halt the recovery. This is an important level for sellers to defend if they want to maintain the upper hand.

Instead, the bulls will have to push and hold the price above the wedge to start a meaningful recovery to 108. The 20-day exponential moving average has been moving and the relative strength index (RSI) has jumped into positive territory, indicating that selling pressure may decrease.

Bitcoin once again pulled back to the crucial support area between $22,800 and the 20-day period ($22,489). This is an important area for the bulls to protect if they want to keep the upside intact.

BTC/USDT daily chart. Source: TradingView
If the price rebounds from here, the bulls will try to push the BTC/USDT pair above $24,255 and challenge the overhead resistance at $25,000. The bears are expected to protect this level with all their might as a break and close above $25,000 could indicate that the bear market is over for good.

Conversely, a deeper pullback occurs if the price drops and breaks below the 20-day moving average. The important levels to watch on the downside are $21,480 and the 50-day simple moving average ($19,697).

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pointers down

It is still trapped between the 20-day exponential moving average ($1,591) and the overhead resistance at $1,680. This narrow range trading is unlikely to last for long and the breakout could happen soon.

ETH/USDT daily chart. Source: TradingView
If the price breaks below the 20-day EMA, the ETH/USDT pair could continue lower and reach $1,500. This level might attract buyers and a bounce from it would keep the pair within the range of $1,500 to $1,680 for a few days.

The bears must plunge the price below $1,500 to gain the upper hand. The pair could then start a deeper correction to $1,352. On the other hand, buyers will have to push the pair above $1,680 to start the rise to $1,800, and later to $2,000.