- Bitcoin tanked by $1,702 early on Friday, the biggest intraday drop since January 2018.
- On the way back up, the hourly chart shows scope for re-test of former support-turned-resistance at $7,619.
- A bounce to $7,619, if any, could be short-lived with prices falling back to $6,178 (daily low) over the weekend, as both the 4-hour and daily charts are biased bearish.
- A bounce from the historically strong support of the 30-day moving average (MA) at at $5,986 would imply an end to the price pullback.
Amid extremely overbought conditions, bitcoin has fallen by $1,702 – its biggest intraday price drop since January 2018.
The cryptocurrency market leader nosedived from the day’s opening price (UTC) of $7,880 to a seven day low of $6,178 on Bitstamp in the Asian trading hours.
The $1,702 drop is the highest since January 17, 2018, according to Bitstamp data. On that day, BTC had tumbled by $2,171 from the opening price of $11,393 only to recovery all the way back to $11,191 by UTC close.
Bitcoin has recovered more than 50 percent since the low hit earlier today. However, just before press time, its price is still down around 8.2 percent on the day at $7,223.
The sell-off seen today doesn't come as much of a surprise, as the widely followed relative strength index (RSI) has been reporting extremely overbought conditions with a near-90 reading earlier this week.
What’s more, many in the investor community had associated BTC’s recent rise with Blockchain Week NYC and Consensus 2019. The cryptocurrency, therefore, was perhaps vulnerable to “sell the fact” pullback.
Looking forward, a minor bounce could be seen in the next 24 hours before a possible fall back to levels below $7,000.
Hourly and 4-hour charts
On the hourly chart (above left), the relative strength index (RSI) has bounced up from oversold levels seen earlier today, suggesting scope for a recovery toward the former support-turned-resistance of the double top neckline at $7,619.
That resistance, however, may cap upside and reverse any price bounce, as a bearish crossover of the 50- and 100-hour moving averages (MA) is almost confirmed.
Further, the RSI on the 4-hour chart (above right) has breached key support at 49.00 in favor of the bears and is yet to hit oversold territory, meaning there is scope for another drop below $7,000.
Bitcoin created a bearish outside day (engulfing) candle on Thursday, a sign of bullish exhaustion, validating a divergence of the RSI. That resulted in a slide to today's low of $6,178.
The move amounts to short-term bearish reversal, as per technical theory. So, the pullback may not be over yet and we could revisit lows seen today over the weekend.
That said, investors should watch out for a bounce from the 30-day MA, as that would imply an end of the correction. The average had reversed pullbacks in March and April.
At press time, the 30-day MA is located at $5,986 and is seen moving above $6,000 over the next couple of days.
Disclosure: The author holds no cryptocurrency assets at the time of writing.