Bitcoin Retraces 45 Percent of Recent Price Gains as Bulls Lose Momentum

Bitcoin is flashing red for the third straight day, with a major portion of the recent price gains now erased.

After a drop back to below $7,800, the cryptocurrency has erased nearly 45 percent of the rise from $6,850 to $8,463 witnessed in the six days to Jan. 8, according to CoinDesk's Bitcoin Price Index.

At press time, the biggest cryptocurrency by market value is currently changing hands near $7,757, representing a 1.5 percent drop from the day's opening price (UTC) of $7,875. Bitcoin shed 1.4 percent and 2.9 percent on Wednesday and Thursday, respectively.

The cryptocurrency did show signs of life with a move higher from $7,780 to $8,000 during the early U.S. trading hours on Thursday. However, the bulls lost momentum near the $8,000 psychological resistance and the minor bounce was quickly reversed.

The rejection likely invited stronger selling pressure, yielding a drop to a low of $7,676 earlier today.

Looking forward, a deeper drop to key support below $7,600 cannot be ruled out.

Bitcoin has dived out of an ascending trendline on the hourly chart, violating the bullish higher -lows pattern.

Further, it has found acceptance under the widely-tracked 100-hour average, with the relative strength index (RSI) reporting bearish conditions below 50.

Bitcoin created a spinning top candle on Wednesday, signaling indecision in the market place.

That ended with bears coming out victorious, as indicated by Thursday's 2.9 percent drop.

Put simply, the odds of a slide to $7,555 – a former hurdle-turned-support of the inverse head-and-shoulders neckline – have increased over the last 24 hours.

The breakout, however, would be invalidated only if BTC prints a UTC close above $7,555.

As seen on the four-hour chart, selling volumes, as represented by the red bars, have dropped throughout the pullback from $8,463 to $7,700.

A low-volume pullback is often short-lived. Hence, the bears need to observe caution despite signs of weakness in the hourly and daily charts.

A move above $8,000, a level that acted as a strong hurdle on Thursday, will imply an end of the pullback and will likely yield a re-test of recent highs above $8,400.

Disclosure: The author does not currently hold any digital assets.