Like the day after a night of hard drinking, the crypto market today is resting in bed, hungover. Very little movement has been observed since yesterday’s crash, which showed strong signals of market manipulation.
Be that as it may, the decisive direction picked by the cryptocurrency market could strongly influence the upcoming trading weeks.
Bearish signals are piling up
Wednesday’s plunge helped undo many of the bullish signals previously observed. The death cross, or meeting of the 50-day and 200-day averages is set to happen tomorrow or the day after. The ominous-sounding indicator is used to denote a trend reversal into bearish territory.
And while Crypto Briefing previously noted that death crosses have been historically followed by ambiguous price performance, many other bearish signs are present.
While the September drop from $10,000 to $8,000 was the completion of a bearish pattern at play since the Summer, the additional period of very low volatility around $8,000 was crucial in defining the next directional move.
As previously reported by Crypto Briefing, low volatility periods are normally ended by sharp breakouts, but any historic recovery from triple-top patterns or bear markets saw breakouts in the upwards direction.
Making matters worse is the total cryptocurrency market cap, which has now approached $200b, levels not seen since just before the November 2018 sell-off.
Finally, yesterday’s Libra Congress hearing may cool the heads of more fundamental-minded investors. Mark Zuckerberg promised Facebook would quit the Libra project should regulatory scrutiny prevent it from operating in the U.S., which introduces uncertainty.
Libra was one of the catalyzing events for this year’s bull run, and though its failure would leave space for decentralized cryptocurrencies, Libra has also shielded them from excessive scrutiny. Many of the concerns levied against it, such as the loss government monetary policy control, can just as easily be applied to any cryptocurrency that achieves mainstream adoption.
The combination of all of these factors provides a strong clue that we may be entering a new bear market, which would be a significant break from previous market cycles.
Nathan Batchelor On Bitcoin
At the time of writing, 08:50 (EDT), Bitcoin remains under heavy bearish pressure as we move into the U.S trading session, as the number one cryptocurrency by market capitalization trades around levels not seen since June 2019.
Various theories have been attributed to the latest decline in BTC/USD pair, ranging from crypto whales liquidating positions to investor jitters over the growing regulatory concerns towards Bitcoin and other coins.
The breakout below the $7,800 support level almost certainly encouraged traders to sell the Bitcoin. The BTC/USD pair has so far lost around $500.00 since breaking below the $7,800 level.
According to the downside projection of a bearish head and shoulder pattern on the daily time frame, the BTC/USD pair could decline towards the $6,800 support level before a meaningful recovery starts to take place.
Looking at the path towards the $6,800 level, the lower line of the weekly Bollinger band, at $7,300, now offers major intraday support. I suspect that a breach of the $7,300 level could result in a quick drop towards the psychological $7,000 level.
Traders should also be mindful that a daily chart of the total market capitalization of the cryptocurrency market is currently showing a bearish head and shoulders pattern.
A sustained loss of the $190 billion level could trigger a widespread sell-off across the cryptocurrency market, leading to a further $15 billion being wiped-off the total market cap of the entire cryptocurrency market.
* ‘Traders have few reasons to be bullish towards the BTC/USD pair while price trades under the $7,800 level’.*
Intraday sentiment for Bitcoin is bearish, at 30.50%, according to the latest data from TheTIE.io. Long-term sentiment for the cryptocurrency has fallen, to 56.80%.
The four-hour time frame is showing that bulls need to move price above the $7,550 level to encourage a technical test towards the September 2019 trading low, at $7,715. Above the $7,715 level, the $7,800 level is now former key support turned resistance.
The RSI indicator on the daily time frame is now approaching oversold territory, while the Choppiness Index on the mentioned time frame highlights that the bearish trend remains strong.
The one-hour time frame shows that BTC/USD selling pressure will resume once price trades below the $7,380 level. The $7,300 level currently offers the only notable form of technical support before the $7,000 level.
The monthly Bollinger band shows that a loss of the $6,600 level could trigger a much larger sell-off towards the $4,000 level.