Bitcoin volatility finally picked up but unfortunately for bulls, price tumbled below the bottom of its symmetrical triangle consolidation pattern. This signals that further declines are in the works, likely lasting by the same height as the chart formation.
The moving averages are still oscillating, though, and have yet to catch up to the sharp drop. Once the 100 SMA moves below the longer-term 200 SMA, more selling pressure could be seen. These moving averages are also close to the broken triangle support to add to its strength as potential resistance on a pullback.
RSI has made its way down to the oversold region to signal that sellers are already tired and may let buyers take over. The oscillator would need to pull out of this area to signal a return in bullish pressure. Stochastic seems to be attempting to move higher to signal that buyers are regaining control. Bullish divergence can also be seen as the oscillator had higher lows while price had lower lows.
Bitcoin bulls typically defend long-term support zones as they wait to buy on dips. The same case could be seen here, although it’s also worrisome that bitcoin has slumped below the $5,800 key support area.
The drop is being blamed on the Bitcoin Cash hard fork that has reminded traders of the “crypto civil war” that could also impact other cryptocurrencies down the line. There has been a lot of uncertainty leading up to this particular upgrade as the community couldn’t seem to reach a consensus before the split.
Still, there are several positive factors to look forward to for Bitcoin and its peers, so there may still be a chance for a reprieve. Institutional investment is still seen to be the main catalyst for a big rebound, most likely early next year, although the SEC decision on Bitcoin ETF applications could also make an impact.
Images courtesy of TradingView
