Bitcoin (BTC) remains on the defensive despite a 4-percent recovery from nine-day lows today, but bearish pressure may weaken if prices rise above key resistance near $3,900.
The world's largest cryptocurrency by market capitalization fell to $3,629 at 05:00 UTC on Bitstamp – its lowest level since Nov. 27. At press time, the price stood at $3,770, representing a 1.5 percent drop on a 24-hour basis.
Despite the quick recovery, the odds appear to be stacked in favor of a drop to recent lows below $3,500.
To start with, BTC closed below $3,711 yesterday, invalidating the short-term bullish reversal signaled by last Wednesday's 11 percent gains. The daily close also added credence to the bearish lower high carved out near $4,400 in the last few days.
Added to that, the bearish setup on the long duration charts suggests strong potential for a deeper sell-off.
That said, a minor recovery rally could be seen if prices cross resistance at $3,882 – upper edge of the falling wedge pattern – seen in the chart below.
As seen above, BTC suffered a symmetrical triangle breakdown yesterday, signaling an end of the corrective bounce and a resumption of the sell-off.
So, the immediate outlook remains bearish as long as prices are holding below the lower edge of the symmetrical triangle pattern (former support), currently at $3,850.
BTC, however, has also established a falling wedge – a bullish reversal pattern. Therefore, the outlook as per the hourly chart would turn bullish if prices cross $3,882 (upper edge of the wedge).
The breakout, if confirmed, would open up upside toward $4,265 (Dec. 2 high) and possibly to $4,410 (Nov. 29 high).
Securing that bullish breakout, however, could prove a tough task, as the major moving averages (50-, 100- and 200-hour) are trending south in favor of the bears.
Securing that bullish breakout, however, could prove a tough task, as the major moving averages (50-, 100-, and 200-hour) are trending south in favor of the bears.
Over on the daily chart, the lower high pattern, yesterday's bearish close below $3,771 and the downward sloping 5- and 10-day exponential moving averages (MAs) continue to favor a re-test of $3,474 (Nov. 25 low).
Notably, BTC struggled to close above the 10-day EMA during the recent corrective bounce. So, a daily close above that EMA, if and when it occurs, could be considered an advance signal of an impending bullish move.
That said, a more credible evidence of a trend reversal would be a convincing break above $4,400.
- The probability of a drop to the recent low of $3,474 remains high while prices are trading below resistance near $3,900.
- A break below $3,629 (daily low) will likely bring a speedy drop toward $3,474 (Nov. 25 low). A close below that would bolster the long-term bearish technicals and allow potential for a drop to psychological support at $3,000.
- A falling wedge breakout on the hourly chart, if confirmed, would open up upside toward $4,265 (Dec. 2 high), above which major resistance is seen a $4,410 (Nov. 29 high).
Disclosure: The author holds no cryptocurrency assets at the time of writing.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.