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$400 Drop: Bitcoin Faces Further Downside After Rejection at Price Hurdle

Having rapidly dropped from $10,500 on Thursday, bitcoin could be staring at deeper losses.

Feb 13, 2020 at 10:09 a.m. UTC
Updated Sep 13, 2021 at 12:17 p.m. UTC

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  • Bitcoin's (BTC) daily and four-hour chart indicators are reporting buyer exhaustion. That, coupled with a bull failure at $10,500, has opened the doors for a correction to a rising trendline at $9,900. A violation there would expose next support at $9,707.
  • A bounce from the rising trendline support will likely yield another rally to $10,500.
  • The overall bull case will remain valid as long as prices are holding above support near $9,100.

Bitcoin could be staring deeper losses, having faced rejection at key price hurdle on Thursday.

The top cryptocurrency by market value was seeing bids around $10,400 during the Asian trading hours. Buying interest weakened after the cryptocurrency failed to stay above Wednesday's high of $10,500 and prices fell sharply to $10,077 around 08:30 UTC.

Bitcoin is currently trading near $10,200, representing a 1 percent drop on a 24-hour basis, according to CoinDesk's Bitcoin Price Index.

Overall, the trend remains bullish, with prices still up 42 percent on a year-to-date basis and trading well above the 200-day average at $8,867. However, the $400 drop seen earlier is suggestive of buyer exhaustion, as it was preceded by repeated failure at $10,500 and accompanied by an overbought reading on the money flow index.

As a result, deeper correction to levels below $10,000 cannot be ruled out.

Daily chart

Wednesday's green candle has been engulfed bearishly by today's retreat from $10,500 to $10,077.

Alongside that, the RSI has produced a lower-highs pattern over the last three days, contradicting the higher highs on price, a bearish divergence that often precedes notable corrections.

4-hour chart

Bitcoin charted multiple four-hour candles with long upper wicks in the last 24 hours, indicating bull fatigue in the range of $10,400-$10,500.

The downward move seen at press time has confirmed the weakening of bull momentum and shifted risk in favor of a slide to the ascending trendline support, currently located near $9,900. That level is also housing the ascending 50-candle moving average.

Supporting the case for a correction is the lower highs (negative divergence) on the relative strength index. Additionally, the MACD histogram is about to cross below 50 in favor of the bears.

If the ascending trendline support caves in, a further decline toward $9,706 could be seen. That level is crucial as it marks the low of a major bullish engulfing candle created Feb. 11.

The bulls would breathe a sigh of relief if the trendline support holds and, if so, would likely mount another charge on $10,500. The overall trend will remain bullish as long as prices are holding ground above $9,075 (Feb. 4 low) keeping the higher-lows setup intact.

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

DISCLOSURE

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.

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