Bitcoin’s price is holding its ground so far today.
As of writing, the world’s largest cryptocurrency by market capitalization is changing hands for $6,495, as per the CoinDesk Bitcoin Price Index. According to CoinMarketCap, the bitcoin-U.S. dollar (BTC/USD) exchange rate has dropped by 1.74 percent in the last 24 hours.
Still, the small decrease hides the fact that BTC retraced more than 50 percent of its recent sell-off yesterday. In the time since, the downside has been capped around $6,400, while a ceiling has formed around $6,800.
So is the short-term bottom in place?
Monday’s sharp recovery and the overnight resilience suggests that the rumored rotation of money out of bitcoin and into bitcoin cash and other alternative currencies may have largely come to a halt. However, it seems the market is still pricing in the recent suspension of the Segwit2x hard fork and and redetermining the value of competing protocols.
Further, the price action analysis indicates the bears need to push bitcoin below the 5-day moving average by today’s close to avoid losing control.
The above chart shows:
- Despite the sharp recovery from near $5,500 levels, the chart still favors the bears, given the descending 5-day moving average (MA) and 10-day MA.
- The relative strength index (RSI) may have moved above 50.00 (bullish territory), but lacks directional strength.
- However, BTC moved back above the ascending trend line (drawn from the Sep. 15 low and Oct. 10 low) yesterday and is holding the trendline today. This is a cause of concern for the bears.
- The longer prices stay above the trendline, the lower will be the odds of history repeating itself, (i.e. prices resuming sell-off and eventually finding a bottom around $5,000). A fresh rally towards record highs could be seen if prices hold above the rising trend line till the weekend.
- A bearish move is likely to gather pace during the week ahead if prices close today below the 5-day MA (currently at $6,392).
- A move above the 10-day MA is likely to be short-lived, given the descending nature of the moving average.
- On the 4-hour chart, the 50-MA has topped out and is about to cross the 100-MA from upside (bearish crossover).
- Again, the descending 50-MA and a potential bearish crossover is likely to ensure that a move above $6,850 is temporary.
Boat at anchor image via Shutterstock