Bitcoin cash is trending down amid news of an upcoming technical change.
After rallying more than 30 percent over the last week, with prices clocking a five-week high of $522.95 on Sunday, the bitcoin cash-US dollar (BCH/USD) exchange rate is $438 at press time, up slightly from a low of $415 yesterday.
However, the move isn’t without cause, as an attempt to update the project’s underlying software appears to have traders slightly spooked.
Bitcoin cash developers explained yesterday that they intend to push forward a fix for the code meant to make its mining network more sustainable as soon as Nov. 1. But while those behind the effort sought to position it as sufficiently tested, noting it won’t come into effect until Nov. 13, the market reaction was more mixed.
Remarks on social media indicate users may be worried about a lack of coordination between the developers and how the blockchain, which feature’s bitcoin’s original code plus a boost to the block size, might compete with Segwit2x, another fork that could launch in mid-November.
Despite the apparent fork concerns, though, price action analysis suggests the market favors the bulls as long as the effects of the hard fork are not too severe.
The chart above shows:
- Breach of the falling trend line last week, followed by a solid rally to a 5-week high of $522.95
- Inside day candle pattern: Monday’s price action (high/low) falls within the price range of the previous day
- Currently, prices are trading at the 23.6% Fibonacci retracement level of the decline from Aug. 19 high to Oct. 19 low.
An “inside day candlestick’ is a neutral pattern, pointing to the price action on the following day, which decides the trend.
- A close below $415 (previous day’s low) would signal bearish inside day candle reversal and shall open doors for a re-test of the trend line support seen around $325 levels.
- On the other hand, a move above $415 would revive the bullish move and could yield rally to $544 (38.2% Fibonacci retracement).
- The bias remains bullish, courtesy of strong upside break of the falling trend line and jump in trading volumes.
As per CoinMarketCap, trading volumes for BCH have jumped 750 percent in the four days since Oct. 29, which might validate the upside break of the falling trend line witnessed on Oct. 27.
Meanwhile, volumes dropped 60 percent on Oct. 30, which means the retreat in prices from $522.95 to $415 lacked substance (drop due to profit taking).
To conclude, volume activity favors further upside in bitcoin cash.
Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which acted as organizer for the SegWit2x proposal.
Bitcoin cash image via Shutterstock