Bitcoin has experienced a small price increase of 2.97% over the past 24 hours of trading. This comes after the cryptocurrency king suffers a steep price decline totalling 14% over the past 7 trading days. BTC is currently being traded around the $6505 handle, at the time of writing.
So, what is going on, why is the price declining?
July looked to be a promising month for Bitcoin as traders anticipated the SEC approval of the Winklevoss ETF, causing the market to begin a small bull run. However, markets tumbled as this was rejected by the SEC and they were further disheartened when the SEC decided to postpone another ETF approval decision for the VanEck ETF until September 30 2018.
The approval of the ETF will make it easier for institutional investors to be able to make investments in Bitcoin and other cryptocurrencies. However, some experts believe that the markets are relying too heavily on the ETF and should focus their attention on the new cryptocurrency exchange launched by BAKKT, which is owned by the parent company of the New York Stock Exchange.
Bitcoin is currently ranked at pole position in terms of overall market cap across the entire industry. It currently has a market cap of $130 billion and has suffered a 21% price drop over the past 90 trading days.
Let us continue to analyse price action for Bitcoin over the long term.
BTC/USD – LONG TERM – DAILY CHART
Analysing the market from the long-term perspective above, we can see that Bitcoin underwent an extraordinary bullish trend when price action started from a low of $2,980 on September 15, 2017, and extended to an all-time high priced at $19,891 on December 17 2017. This was a price increase totalling 545% from low to high.
After placing the all-time high, we can see that the market began to roll over, falling below the 100 day moving average in January 2018 and finding support at the .786 Fibonacci Retracement, during February, priced at $6,622. This was the starting point of the formation of a descending triangle pattern.
The Descending Triangle
We can see that the market remained above this price level, $6,622, for the next 4 months until it fell below, during June 2018, to find support at a downside 1.414 Fibonacci Extension level priced at $5,847. This, in turn, solidified the base of the descending triangle that we can see in the chart above.
The descending triangle has been in play for around 7 months of trading, so far. We can see that anytime price action attempted to break above the upper boundary of the symmetrical triangle, the market was swiftly rejected.
The recent price run witnessed last month in July, terminated at the upper boundary of the descending triangle where the market was rejected once again. The market is expected to continue to trade within the confines of this consolidation pattern until price action breaks out of the pattern.
Let us continue to analyse price action a little closer over the more recent period to highlight any potential support and resistance zones.
BTC/USD – SHORT TERM – DAILY CHART
Analysing the market from the short term perspective above, we can see that price action had been falling since May as it dropped from a high close to $10,000 and continued to fall until reaching a low of $5,780 toward the end of June.
What happened to the July ‘Bull-Run’?
As July started to trade, we can see that, in anticipation for the SEC ETF approval, price action began to rally, forming a small bullish run. This bullish run started from a low of $5,780 on June 29, 2018, and extended to a high of $8,506 on July 24 2018. This was a 47% increase in price from low to high.
The bullish run terminated in a price zone that was heavy in resistance markers. The first marker of resistance was the bearish .618 Fibonacci Retracement priced at $8,371. This was measured by the bearish decline witnessed from May 2018 to June 2018. The second market of resistance was the upper boundary of the descending triangle acting as a significant resistance trend line. A break above the triangle would have signified the potential for a long-term bullish trend to form. The third and final marker of resistance in this zone was a 1.414 Fibonacci Extension level priced at $8,290. With these three confluence indicators of resistance, it is no surprise that the market rolled over at this area.
As August started to trade we can see that price action has reversed and has continued to fall until reaching support at the short term .886 Fibonacci Retracement (drawn in red) priced at $6,129. We can see that this zone of support was bolstered by a short-term downside 1.414 Fibonacci Extension level priced at $6,243.
Where can we go next?
Price action is currently trading at resistance marked by a downside 1.272 Fibonacci Extension priced at $6,471. If the bulls can garner some momentum and push the price above this level, we expect immediate resistance to be located at the short-term .618 Fibonacci Retracement level priced at $6,845. Further resistance above this level is expected at the short term .382 Fibonacci Retracement level priced at $7,481. This area will require significant momentum to overcome due to the 100 day moving average being located in this area. The final area of resistance is expected at the upper boundary of the long-term descending triangle.
What if the bears take control again?
Alternatively, if the bears continue to increase the pressure and push prices lower, we expect immediate support to be located at the .886 Fibonacci Retracement, once again, priced at $6,129. Support below this level is expected at the psychological round number handle of $6,000 followed by the downside 1.618 Fibonacci Extension level priced at $5,916. The final level of expected support is at the base of the descending triangle. A break below this level would create new yearly lows and could prolong Bitcoins downtrend below $5,000.
What are the technical indicators printing?
The technical indicators within the market are heavily favouring the bears at this moment in time. The RSI is currently trading well below the 50 handle and is at oversold conditions. For a sign that the bearish momentum is fading within the market, we will look for the RSI to make its way back toward the 50 handle. A break above the 50 handle would indicate that the bulls are starting to regain control within the market.