Bitcoin Price Looks South After Worst Daily Loss Since November

Omkar Godbole
Jan 11, 2019 at 11:00 UTC
Updated Jan 11, 2019 at 11:18 UTC
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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 demoralized bulls started to exit 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,

Adding credence to the bearish move, trading volumes jumped to the highest level since Dec. 21 and 14-day relative strength index (RSI) breached the ascending trendline to the downside.

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) hurdle for four weeks straight.

The candlestick pattern indicates that the week began with optimism, but is approaching a more pessimistic close. 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.

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  • 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.

Bitcoin image via Shutterstock; Charts by Trading View

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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.