TL;DR the Bear gathers momentum – but it’s surely time for a bounce.
This has been one of the roughest weeks for bulls in a very long time.
Sunday’s crash saw bitcoin bottom at $3,475 (Bitstamp). This was followed by a brief bounce, but this was little more than a reaction rally and short-squeeze – something almost inevitable when the market falls so far so fast. The support level that had formed at $4,200 shortly before has become resistance, and bitcoin failed to punch through this: the bounce was weak and BTC soon drifted back below $4,000.
As Sunday closed, RSI dropped to 31.45 on the weekly, indicating we are approaching oversold conditions. It takes a lot of bearish action to push RSI under 30 on such a long timeframe. In fact, the last time that happened was the capitulation crash of January 2015, when the RSI read 27.53. But don’t get your hopes up just yet, because it hit 30.34 at the end of September 2014, with a low of $275. Anyone who bought that dip would have congratulated themselves as the price quickly rose back above $450 – but then plunged to its ultimate low of $152. There’s good reason to think we’re not at the end of this bear market yet.
Nevertheless, these things don’t happen in a single clean swoop – as the 2015 example above illustrates. The market can remain irrational longer than you can remain solvent, as the saying goes, but it keeps people guessing. When conditions are this oversold, a reaction rally is on the cards. When it will happen and where it will end we can’t say, though we’ve previously noted that there will be killer resistance at $5,700–$6,000, since this has been incredibly strong support in the past. It’s highly unlikely we’ll break through that on the first attempt and the rejection of those levels might see one last leg for the bear market.
On Monday BTC dropped back towards Sunday’s low but did not fall beneath it. At the time of writing – and things change fast – BTC has managed to remain above last week’s low. It does seem likely that BTC will drop lower at some point; the 200 weekly moving average stands at around $3,150, which also lines up with historic support. However, there’s no telling whether that will happen this week, or further down the line after a bounce.
We’ve been hearing all kinds of wild predictions about how low BTC might go. BitMEX CEO Arthur Hayes, who earlier this year predicted $5,000 would happen, has gone on record saying $3,000 is quite possible. Others have stated $2,000 is likely, or even that the old all-time high of $1,200 will be revisited. Fear is as strong as hope; back in 2014, people were predicting double and even single digits. If you’re trading, manage your risk carefully; you can find where to learn how here.
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