The market has suffered another double-digit BTC collapse over the past 48hrs, as the ‘digital gold’ tumbles dramatically through its $7,000 psychological support.
The global crypto market capital has also fallen below $300 Billion for the first time since mid April, as buying momentum has struggled to regain traction over Q2.
Panicked investors hurriedly checked the Mt Gox BTC wallet for any changes in the balance, but none were reported. Numerous media sources are now pointing the finger at the recent Coinrail hack and ongoing CFTC investigations as the main culprits for this sudden decline in BTC’s performance, although both allegations are still inconclusive.
With Bitcoin’s price affected by so many geo-political, mainstream media and fear factors, it’s always incredibly difficult to pin its decline to any single reason. What can be noted is that during the past 48hrs in particular, BTC’s selling volume has increased radically over 2 short phases, as someone/ some people collaboratively dumped huge amounts of BTC in co-ordinated manoeuvres.
Whether you believe in BTC manipulation and the ‘Bitcoin Cartel’ or not, it’s unusual to see a global market shift this dramatically, to then stabilize and then shift again unnaturally over a 3 day period. In a widespread panicked market you’d expect to see a continual decline with greater volatility, as shown below over 3 days in February during the height of the market slump.
Here Bitcoin slumped by more than $2000 over 2 days, from $8200 to a low of $6099, compared to only a $1,000 drop recently.
With this in mind, it is becoming increasingly more difficult to predict Bitcoin’s future price action, as these sporadic market movements take hold of the #1 cryptocurrency. That being said though, there are some strong market indications that BTC could be in for a rocky ride ahead, if things don’t improve.
Over 1D BTC/USD chart we can see a uniform descending triangle pattern form against a strong underlying support at 0.382 fib level/ $6,600 and a downtrending resistance. Typically this is a sign that selling pressure is progressively diminishing bullish resistance over time.
This consolidating pattern is also further supported by the Ichimoku indicator which is currently projecting a bearish Kumo cloud tightly along that same area.
Looking closely at the current price action, BTC has retracted back along the lower support as a result of the recent bear market, where it is now battling to hold the position until bullish support arrives.
Ordinarily this would not normally be a particularly bad position for BTC to be in, with the potential for a bullish triple bottom likely to inspire renewed faith and increased buying pressure. However, when you look more closely at the candles and the 500 EMA (yellow) we can see a very bearish danger zone fast approaching.
Bitcoin’s current activity has placed it perfectly in contention with the 500 EMA, a prominent bearish indicator if candles diverge below this level.
This is a hugely pivotal moment for BTC because if candles do drop past the 500 EMA and hold, then it will signal to all traders that buying momentum has fallen below a key moving average support, and that a crash will almost certainly follow.
For now, it is fortunate that BTC also happens to be resting along a strong support that has safely held it from further demise, two times before. A strong rally of BTC backers will be needed more than ever here to prop the asset up above this line before further panic selling kicks in.
Looking at the MACD over the 1D chart, we can see that despite a consolidating price action, momentum has actually been building back towards the signal line.
As with any descending triangle pattern, there is always the potential for a bullish reversal provided the continuously tested base support is able to hold strong. In this instance, BTC’s price must regain composure if it’s to retest the upper triangle resistance – which will be somewhere around the 0.786 fib level if successful.
If support fails on this occasion, then it’s likely we’ll see BTC pass beyond the next psychological support at $6,000 and find temporary relief along the 0.236 fib level ($5,786).
Coincidentally this is the same region BTC found support at before skyrocketing to its all-time high over Q4 last year, so maybe there is some hope amongst the current Bitcoin wreckage.