Bitcoin's bulls are taking a breather after a double-digit price gain in October.
- The leading cryptocurrency by market value is trading near $13,500 at press time, representing a roughly 2% decline on the day, according to CoinDesk's Bitcoin Price Index.
- The minor decline comes after last month's 28% rally, the biggest single-month gain since April.
- On Saturday, bitcoin had surged to a 33-month high of $14,093 but quickly fell back.
- Some analysts think a bigger pullback may be seen in the short term.
- "If we consider overbought daily technicals plus failure to beat the 2019 high resistance and a risk-off backdrop, it is perfectly reasonable to anticipate the possibility for a healthy decline ahead," Joel Kruger, a currency strategist at LMAX Digital, told CoinDesk.
- Bitcoin's failure to establish a foothold above the June 2019 high of $13,880 has validated the short-term bull fatigue signaled by the 14-day relative strength index (above left).
- As such, some technical traders may feel tempted to take profits, forcing prices lower.
- "There might be small corrections, as some market participants, who bought at lower prices, may exit the market," Ashish Singhal, CEO of cryptocurrency exchange CoinSwitch, said.
- Further, continued coronavirus-induced weakness in stock markets could trigger a global demand for cash, as seen in March, aggravating the technical pullback.
- Another source of risk for bitcoin is the U.S. presidential election on Tuesday, according to Singhal.
- Many fear that the results of the election will not be immediately clear, resulting in a period of uncertainty for the markets.
- All these factors considered, the possibility of bitcoin revisiting the former hurdle-turned-support of $12,500 cannot be ruled out.
- "Unless the market can establish above $14,000, there is a risk that rally stalls here in favor of a healthy retreat," Kruger said.
- While a pullback could be seen, analysts don't foresee a price crash, as the cryptocurrency currently has a strong bid from institutions, trader and analyst Nick Cote told CoinDesk last week.
- Disclosure: The author holds small positions in bitcoin and litecoin.