Bitcoin's price remains in a tight range below $6,500 despite recently breaching a key price hurdle.
The leading cryptocurrency cleared the resistance at the trendline drawn between the July 25 and Sept. 4 highs on Oct. 10., yet the bullish breakout failed to put a bid under BTC, leaving it directionless in a narrow range of $6,476–$6,376.
At press time, BTC is changing hands at $6,395 on Coinbase.
The U.S. stock markets fell sharply yesterday triggering a flight to safety across the globe. The heightened risk aversion, as represented by a 3 percent drop in the S&P 500, could be bad news for bitcoin as the cryptocurrency is still considered a risky asset. The blue-chip index has been leading the bitcoin market by 12 hours or more over the last few weeks.
As a result, a range breakdown cannot be ruled out. However, if BTC continues to show resilience in the next few hours, then the prospects of a range breakout would improve. Even so, a bullish reversal would be confirmed only if prices climb above $6,810, as discussed earlier this week.
The bulls' inability to capitalize on the violation of the falling trendline could be down to the fact that the breakout was a sideways breach – generally considered a sign of indecision in the marketplace.
As a result, attention has shifted to last week's high of $6,810, which, if scaled, may allow a sustained rally to the September high of $7,402.
A break below $6,376 (lower edge of the range) could embolden the bears, driving prices down to key support at $6,230 (horizontal line on the above chart). Acceptance below that level would expose the next major support: the 21-month exponential moving average (EMA) lined up at $6,121.
Over on the monthly chart, BTC seems to have carved out a bottom along the 21-month EMA. However, the 5-month and 10-month EMAs produced a bear cross last month. As a result, a break below the 21-month EMA cannot be ruled out as long as BTC is trading below the 10-month EMA of $7,114.
- A range breakout could happen if BTC continues to defend support at $6,376 despite the risk aversion in the stock markets. A break above $6,476, if confirmed, would open the doors to $6,810.
- A range breakdown, if confirmed, would shift risk in favor of a drop to $6,230 and $6,121 (21-month EMA).
- A weekly close (Sunday's close as per UTC) above last week's high of $6,810 would put the bulls in a commanding position.
- A monthly close below the 21-month EMA will likely prove costly.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
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