Price Dip Leaves Bitcoin Exposed to $7.2K Support

Bitcoin dived out of a narrowing price range on Wednesday, opening the doors for a deeper drop to $7,200.

AccessTimeIconMay 23, 2019 at 11:00 a.m. UTC
Updated Sep 13, 2021 at 9:13 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

View

  • Bitcoin suffered a contracting triangle breakdown on Wednesday, as expected.
  • The range breakdown is backed by bearish developments on the daily and 4-hour chart indicators. BTC, therefore, risks falling to $7,206 (May 18 low) in the next day or two.
  • A UTC close below $7,206 would confirm a double-top breakdown and open doors for a drop to $6,070 (target as per the measured move method).
  • The outlook would turn bullish if the price finds acceptance above $8,050 in the next 24 hours.

Bitcoin (BTC) dived out of a narrowing price range on Wednesday, opening the doors for a deeper drop to $7,200.

The leading cryptocurrency by market value fell below $7,850 in the U.S. trading hours yesterday, confirming a downside break of a contracting triangle pattern – a series of higher lows and lower highs – created in the first two trading days of the week.

The period of indecision ended with sellers gaining an upper hand, and the resultant range breakdown neutralized the immediate bullish view put forward by the near 13 percent price rise seen on Sunday.

As a result, BTC could continue to lose altitude in the short term. Currently, the cryptocurrency is trading at $7,530 on Bitstamp, representing a 4 percent drop on the day. Prices hit an intraday low of $7,468 earlier today.

Looking forward, the focus is on the key support at $7,200– a level the bulls must defend, as a break lower would confirm a short-term bullish-to-bearish trend change on the technical charts.

4-hour chart

btcusd-4-hour-chart-12

BTC dived out of the contracting triangle yesterday, validating bullish exhaustion signaled by multiple rejections at $8,300.

More importantly, the range breakdown is backed by a bearish below-50 reading on the relative strength index (RSI) and a drop into bearish territory below zero on the the moving average convergence divergence (MACD) histogram.

The path of least resistance, therefore, is to the downside.

Daily chart

btcusd-daily-chart-26

On the daily chart, early signs of temporary bearish reversal have emerged in the form of a "hanging man" candle, as discussed earlier this week. Further, the daily MACD has turned bearish for the first time since May 2 and the RSI continues to create bearish lower highs.

BTC, therefore, could complete the forming double-top pattern seen above with a drop to $7,206 (May 18 low) in the next day or two.

A UTC close below $7,206 would confirm a double-top breakdown – a short-term bullish-to-bearish trend change – and would create room for a slide to $6,070 (target as per the measured move method).

That said, the historically strong support of the 30-day moving average (MA) is currently located at $6,475. That average is seen sloping upwards to $6,500 in the next couple of days. As a result, any following sell-off could be cut short near that level.

The outlook would turn bullish if prices rise above $8,050 in the next 24 hours, contradicting the bearish developments on the short-term charts. In that case, a rally to $8,500 (June 2018 high) could be seen.

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

Bitcoin image via Shutterstock; technical charts by Trading View

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.


Learn more about Consensus 2024, 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.