FIL dropped to a key 38.2% Fib support level – Is a recovery likely?

Disclaimer: The information presented does not constitute financial, investment, trading, or other types of advice and is solely the writer’s opinion

• FIL dropped to a crucial support level at 38.2% Fib level. 
• Demand improved, but sentiment dropped almost to a neutral level. 

Filecoin [FIL] was one of the major losers in the past week. It depreciated by over 25% in the past seven days, according to CoinMarketCap. But the drop has hit a critical support level which could tip bulls to enter the market if it holds. 

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Can the 38.2% Fib level hold?

Source: FIL/USDT on TradingView

FIL doubled in value in mid-February thanks to its planned Filecoin Virtual Machine (FVM) in March. It rose from $5 to $10 but was rejected after Bitcoin [BTC] lost hold of the $25K. 

The drop has hit a key support level at 38.2% Fib level ($6.519). The level was a crucial resistance level in 2022, particularly in the second half of August, September, and November. As such, it could provide bulls an entry position if it remains steady. 

Bulls can target the 61.8% Fib level ($7.662) or the bearish order block at the 78.6% Fib level ($8.5). The uptrend could be accelerated if BTC breaks above $23.35K and surges upwards. But bulls could wait for a pullback to retest the 38.2% Fib level to confirm the uptrend before making moves. 

Alternatively, short-sellers can sell high, just below the 38.2% Fib level ($6.519), buy back cheaply if FIL drops at the 23.6% Fib level ($5.811), and pocket the difference. However, short-sellers can enjoy this extra opportunity if FIL closes below 38.2% and confirms a further downtrend. 

The RSI declined but showed signs of pivot near the equilibrium. However, there was a looming death cross, as shown by the MACD (moving average convergence divergence), which could complicate matters for bulls if it occurs. 

Read Filecoin [FIL] Price Prediction 2023-24

Sentiment dropped to a neutral level, but demand improved

Source: Santiment

According to Santiment, FIL’s weighted sentiment hit a high positive level in mid-February following the planned Filecoin Virtual Machine (FVM) announcement.

It shows the news got positive social interactions, improving investors’ confidence in the token. Similarly, the increased Funding Rate shows that demand for the token rose in the same period. 

However, at the time of writing, sentiment had declined close to the neutral level, partly because of the prevailing macroeconomic headwinds following increased inflation in January. 

Nevertheless, FIL’s demand saw slight improvement at press time and could boost recovery efforts if the support stops the plunge.