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Bitcoin Price Looks South After Worst Daily Loss Since November January 11, 2019 17 Views
Bitcoin’s (BTC) price saw its biggest drop for seven weeks on Thursday, weakening the prospects of a bullish breakout above $4,100.
The world’s largest cryptocurrency by market value hit a 3.5-week low of $3,503 yesterday, before closing (as per UTC) at $3,627 – down 9.4 percent on the day. That was the biggest single-day drop since Nov. 24 and the fourth biggest daily loss of the last two months, according to CoinDesk’s Bitcoin Price Index (BPI).
Essentially, the hard-fought gains of the last two weeks have been erased in the last 24 hours. The cryptocurrency had carved out a bullish-higher low near $3,550 on Dec. 27 before crossing $4,000 on Jan. 6.
The follow-through to break above $4,000, however, was anything but encouraging. Moreover, signs of bullish exhaustion emerged near the crucial resistance of $4,130 (inverse head-and-shoulders neckline) and the demoralized bulls exited the market yesterday, leading to a sharp drop in prices.
As a result, the bears may be feeling emboldened and could attack the crucial support lined up near $3,550. As of writing, BTC is changing hands at $3,630 Daily chart
Bitcoin fell to $3,500 yesterday, confirming a bearish doji reversal on the daily chart. The cryptocurrency also closed below the crucial 50-day moving average (MA) support,
Further, trading volumes jumped to the highest level since Dec. 21, adding credence to the bearish move.
What’s more, the 14-day relative strength index (RSI) has breached the ascending trendline in favor of the bears.
With the odds stacked in favor of the bears, the immediate support of $3,566 (Dec. 27 low) could be breached soon. That would only bolster the already bearish technical setup. Weekly chart
On the weekly chart, BTC has created a bearish outside reversal candle – this week’s price action has engulfed the previous week’s high and low – having failed to penetrate the 200-week exponential moving average (EMA) for four weeks straight.
The candlestick pattern indicates that the week began with optimism, but is coming to close on a pessimistic note. As a result, it is widely considered a sign of bearish reversal.
Put simply, the doors have been opened for a re-test of the 200-week MA lined up at $3,250. Supporting that bearish case is the downward sloping 10-week MA. View BTC risks breaching the bullish-higher low of $3,566 over the weekend. That would add credence to the bearish setup on the weekly chart and open the doors to $3,250 (200-week SMA). A quick recovery above $4,000 would abort the bearish setup, although the probability of BTC picking up a strong bid in the short-term is quite low. A convincing weekly close (Sunday’s UTC close) above the 200-week EMA $4,148 will likely put the bulls back into the driver’s seat and allow a stronger rally towards $5,000.
Disclosure: The author holds no cryptocurrency assets at the time of writing.