Bitcoin’s price risks deeper losses below $8,000 as the bears seem to be winning a four-day-long tug-of-war with the bulls, technical studies indicate.
At press time, BTC is changing hands at $7,950 on Bitfinex – down 2 percent in the last 24 hours – having clocked a low of $7,968 earlier today.
The cryptocurrency was largely restricted to a narrow range of $8,300 to $8,050 since late Friday. Consequently, Bollinger bandwidth – a volatility indicator – dropped today to the lowest level since October, as per the short duration technical chart.
Hence, we could be in for a big move as a prolonged period of low volatility (range bound activity) usually makes way for a big move on either side.
That said, the big move could happen to the downside as the bull case has weakened following BTC’s failure to capitalize on a descending broadening channel breakout witnessed on Friday.
The above chart shows:
- The bulls failed to capitalize on the descending broadening channel breakout, leaving doors open for the bears to make a strong comeback.
- Bollinger Bands breakdown (standard deviation of +2, -2 on the 20-candle moving average) – a bearish setup.
- A downside break of the trading range – bearish pattern.
- BTC has found acceptance under the support of the 50-candle moving average (MA).
- The relative strength index (RSI) has adopted a bearish bias (dropped below 50.00).
Clearly, the technical chart is aligned in favor of the bears. Further, the decline could be sharp, a key volatility gauge indicates.
4-hour chart Bollinger bandwidth
The volatility, as represented by the Bollinger bandwidth (gap between the bands) on the 4-hour chart, fell today to its lowest level since October. As stated earlier, an extended period of low volatility is usually followed by a big move, which is seen happening to the downside.
As a result, BTC could suffer a deeper drop below the $8,000 mark.
- The current 4-hour candle will likely close below the lower Bollinger band, confirming a bearish breakdown. In this case, BTC is seen falling to the ascending (bullish) 100-candle MA on the 4-hour chart, currently located at $7,609.
- A daily close (as per UTC) below the 100-day MA support of $7,591 (former resistance) would signal a short-term bullish-to-bearish trend change.
- The bulls are seen making a comeback if BTC finds acceptance above $6,300.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
This article is intended as a news item to inform our readers of various events and developments that affect, or that might in the future affect, the value of the cryptocurrency described above. The information contained herein is not intended to provide, and it does not provide, sufficient information to form the basis for an investment decision, and you should not rely on this information for that purpose. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.
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