Bitcoin's Price Moves Below $8K as Bull Case Weakens

Bitcoin's price faces the risk of a deeper drop as an extended period of low volatility action has ended up making way for a downside move.

Omkar Godbole

By Omkar Godbole

Jul 31, 2018 at 10:59 a.m. UTC

Updated Sep 13, 2021 at 8:14 a.m. UTC

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Alex Thorn

Head of Firmwide Research

Galaxy

Hear Alex Thorn share his take on "Bitcoin and Inflation: It’s Complicated” at Consensus 2023.

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Omkar Godbole

Alex Thorn

Head of Firmwide Research

Galaxy

Hear Alex Thorn share his take on "Bitcoin and Inflation: It’s Complicated” at Consensus 2023.

Secure Your Seat

Alex Thorn

Head of Firmwide Research

Galaxy

Hear Alex Thorn share his take on "Bitcoin and Inflation: It’s Complicated” at Consensus 2023.

Secure Your Seat

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.

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 $7,930 earlier today.

The cryptocurrency has been largely restricted to a narrow range of $8,300–$8,050 since late Friday. Consequently, the 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.

Further, the big move (if it does materialize) 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.

4-hour chart

The above chart shows:

The bulls failed to capitalize on the descending broadening channel breakout, leaving the doors open for the bears to make a strong comeback.
A 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.

View

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 $8,300.

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin image via Shutterstock; Charts by Trading View

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Omkar Godbole

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Omkar Godbole