At the time of writing, bitcoin is trading right on the $10k line. This represents an important psychological level and also coincides with the 50-day moving average. The technicals are bearish for now, leading us to expect another dip to $9k is possible, or potentially lower.
Bitcoin is still trading within the broad channel we have seen for the last month. This slopes downwards, with a series of lower highs and lower lows. Having dropped below the 50DMA, which has served as support in the past, the bottom of this channel may be the next target. This currently lies around $8,800.
Meanwhile, the 100 DMA is steadily rising to meet price, which is still trading above it. Right now it sits around $8,500, and within a few days will add additional support to the bottom of the downward-sloping channel. RSI on the daily chart is below 50 and trending downwards.
In addition, an inverse head-and-shoulders – typically a bullish reversal pattern – failed to play out on the 4h chart on Sunday. The neckline was breached, indicating a potential move back up towards $12k, but ultimately proved a fakeout.
In the short-term, then, our targets are $8,800 to the downside, which is channel bottom and coincides with earlier support. Below that, should this range fail to hold, there is the prospect of $8,200 (also previous support) and should that fail the high $7,000s. If bitcoin overshoots to the downside, we have our historically strong support zone from $6k up to $6,800 or so.
To the upside, we have our recent lower high at $11,100 to break, the top of the channel – currently $12,500 – and then the year high of $13,880.
All of this is quite normal for bitcoin, and for markets in general. After any strong run-up we can expect a correction and consolidation. We do not know exactly how low bitcoin will correct; while there are areas of interest, nothing is set in stone. A dollar-cost averaging approach may be useful at this time, or else wait for a clear reversal signal. (As ever, this is not financial advice.)
Lastly, Bitcoin’s fundamentals have never been better. Hashrate is at an all-time high, and Bakkt started user testing yesterday. Should we see 4-digit bitcoin again, it may be short-lived.
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