Bitcoin’s Price Looks Set for a Drop to $10K
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- Bitcoin appears on track to test the psychological support of $10,000, as the daily chart moving averages and other key indicators have turned bearish.
- A high-volume price breakdown seen on the hourly chart also favors a drop to $10,000.
- However, the hourly chart indicators are reporting a bullish divergence. So, a price bounce to $10,700 could precede a drop to $10,000.
- The outlook as per the daily chart would turn bullish if prices print a UTC close above $12,000.
Bitcoin (BTC) is looking south, having retraced more than 50 percent of the $3,000 rally seen in the 10 days to Aug. 6.
The top cryptocurrency by market cap is currently trading at $10,500 on Bitstamp, representing a 6 percent loss on the day.
At the current price, roughly 53 percent of the rally from the July 28 low of $9,111 to the Aug. 6 high of $12,325 stands erased.
BTC’s recent rally coincided with the devaluation of China’s yuan (CNY). Notably, the People’s Bank of China allowed the yuan to fall beyond 7 per U.S. dollar on Aug. 5.
On the same day, BTC rallied 7 percent and rose to a one-month high of $12,325 on the following day, triggering speculation that BTC is acting as a safe haven asset in China.
That narrative may become entrenched in the market as bitcoin’s drop seen in the last 48 hours is accompanied by a recovery in the yuan. CNY appreciated by 0.26 percent yesterday and is reporting a 0.32 percent gain against the greenback on Wednesday.
However, Peter Schiff, CEO of Euro Pacific Capital Group and a bitcoin skeptic, believes the cryptocurrency did not act as a safe haven in China. Investors who bought bitcoins based on the safe-haven narrative are now cashing out, tracking the recovery in yuan, he says.
Meanwhile, Jacob Canfield, featured trader on CNBC and CoinDesk, has associated bitcoin’s price drop with the delay in fiat withdrawals and deposits for cryptocurrency exchange Coinbase’s U.K. customers. The delay is likely caused by Barclays bank’s decision to end its partnership with Coinbase.
Whatever the reason for the price drop, the cryptocurrency is now looking weaker than it did yesterday, although a drop to $10,000 could be preceded by a minor bounce.
Daily chart
A bearish crossover of the 5- and 10-day moving averages and the below 50-reading on the relative strength index (RSI) indicates the path of least resistance is to the downside.
The moving average convergence divergence histogram has also crossed below zero, confirming a bullish-to-bearish trend change.
So, the cryptocurrency looks set to test $10,000. The outlook would turn bullish if and when prices print a UTC close above $12,000. That level acted as strong resistance in six days to Aug. 10.
Hourly and 4-hour charts
The high-volume descending triangle breakdown seen in the hourly chart (above left) indicates the sellers are in control.
However, both RSI and MACD have charted higher lows on the hourly chart, contradicting the lower lows on price.
That bullish divergence of key indicators suggests scope for a price bounce, possibly to the resistance at $10,700 A violation there would expose $11,000.
The oversold reading on the 4-hour chart RSI (above right) also indicates scope for an intraday recovery rally.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin image via Shutterstock; charts by Trading View
OhNoCrypto
via https://www.ohnocrypto.com
Omkar Godbole, Khareem Sudlow
