Bitcoin Price May Test $7,750 as Selling Pressure Grows
Bitcoin is looking increasingly weak, having dropped nearly 2 percent on rising trading volumes Wednesday.
The top cryptocurrency by market value fell from $8,150 to $7,912 in the early U.S. trading hours on Wednesday before printing a UTC close at $7,996.
The price slide strengthened the case for a retest of recent lows near $7,750 put forward by Tuesday’s bearish “outside bar” candle.
Moreover, as reported, selling pressure has been building in recent days following bitcoin’s failure at the 200-day moving average hurdle on Oct. 11. The key MA is widely considered a barometer of the long-term trend.
At press time, BTC is changing hands at $8,100 on Bitstamp, representing a marginal loss on the day.
Prices have recovered more than 2 percent from Wednesday’s low near $7,920, but remain well below the 200-day MA, currently at $8,778. Therefore, the path of least resistance remains to the downside.
Wednesday’s drop was backed by higher than average levels of bearish (red candle) volume and bolstered the already bearish technical setup represented by Tuesday’s bearish outside bar candle.
The daily relative strength index (RSI), an indicator that provides a reading of overbought and oversold conditions on a particular asset over a particular time frame, has been suppressed beneath the neutral 50 line ever since losing altitude on Sept. 5. It’s struggled to gain a bullish foothold ever since.
BTC, therefore, looks set to retest support levels located near $7,750. A violation there could prove costly, opening the doors for a deeper drop toward $7,200, as predicted by a few observers.
The onus is now heavily on buyers to drive prices back above $8,300 quickly or risk conceding full control to the bears in the immediate short-term.
As the month of October matures, another key volume metric stands out on the larger time frames.
Bearish volume has been decreasing in parallel with price drops, which typically suggests stability for buyers as the markets look to equalize on seller exhaustion.
However, it is not uncommon in crypto for prices to ignore generally accepted theory, as seen in November of last year when prices broke to the downside from a bearish descending triangle pattern and had similar volume patterns as seen currently.
This only acts to strengthen the bearish bias when viewed from larger time frames, with the monthly RSI also on a downward move toward the aforementioned neutral 50 line, hinting at a continuation of the prevailing southward trend.
Concerns of a global recession are mounting amid the U.S.-China trade war and levels of corporate debt are increasing, as noted by the International Monetary Fund (IMF) on Wednesday.
Many analysts consider bitcoin a safe haven asset, yet the evidence for the claim is not conclusive and the cryptocurrency has been no stranger to the pressure felt across the broader global markets.
Risk sentiment will likely remain weak, possibly keeping BTC under pressure until a clearer agreement is sketched out between the world’s two largest economies