Bitcoin has formed lower highs and lower lows to consolidate inside a falling wedge pattern on its 4-hour time frame. The price bounced off the top of the wedge and is heading back to the bottom for a test of support.
This lines up with the 50% extension level at $9,071 and is also near the swing low. The price is currently finding support at the 38.2% extension at $9,700 but stronger selling pressure could take it down to the 61.8% level around $8,585 or the 78.6% level near the $8,000 major psychological mark. Sustained bearish momentum could drag it down to the full extension at $7,013.71.
RSI is heading down to show that selling pressure is in play, and the oscillator has room to go before reaching the oversold region to reflect exhaustion. Stochastic is also pointing down to signal a return in bearish momentum as well. A break below support could set off a drop that’s the same height as the chart formation while a move past the resistance around $10,000 could spark a strong rally.
BTC/USD Chart – TradingView
The 100 SMA is below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. In other words, resistance is more likely to hold than to break. The 100 SMA held as dynamic resistance also and could continue to keep gains in check.
Bitcoin continues to consolidate as it awaits how US officials might act in relation to the Facebook Libra announcement. Recall that cryptocurrencies recently rallied across the board on the pickup in mainstream attention but soon after returned their gains as the prospect of stricter regulation popped up.
A bit of support was found when a Chinese court upheld bitcoin’s status as property, which reflects a softer stance than in the past when the government attempted to ban the cryptocurrency in the country. For now, traders are still holding out for stronger catalysts that could determine where price might be headed next.
Images courtesy of TradingView
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