CoinDesk analysis
The latest CoinDesk analysis of Bitcoin’s(BTC) price movements is from yesterday updated at 11:18 UTC by Omar Godbole. Godbole notes that BTC suffered a large drop on Thursday the largest in seven weeks. This has made the prospects of a bullish breakout above the $4,100 level less likely.
Bitcoin reached a 3.5 week low of just $3,503 on Thursday but closed at $3,627 UTC. It was down 9.4 percent on the day. This was the largest decline on a single day since way back on November 24 last year, according to CoinDesk’s Bitcoin Price Index.
The hard-found gains that the bulls have managed to achieve in the last two weeks have been lost in just the last 24 hours. BTC had carved out a bullish higher low near $3,550 on December 27 before it managed to cross the $4,000 level on January 6.
However, the follow-through beyond the $4,000 level was disappointing. Signs of bullish exhaustion appeared near the crucial resistance level of $4,130 and this appears to have demoralized the bulls and led to some of them exiting the market. This could have been the reason for the sharp decline in prices.
The bears may try to drive the price down below the critical support level near $3,550. As Godbole posted his article, BTC was trading at $3,630 quite a ways above that level.
Chart analysis
The daily chart showed a bearish doji reversal that was confirmed by BTC’s fall to $3,500 on Thursday. Bitcoin also closed below the key 50-day moving average (MA) support level. Trading volumes also rose to the highest level since back on December 21 adding further validation the the bearish signs. Added to this, the 14-day relative strength index (RSI) broke through the upward trendline downwards.
The odds are stacked in the bears’ favor and the immediate support level of $3,566 the December 27 low could soon be breached and this would strengthen the already bearish setup.
The weekly chart shows that Bitcoin’s price movements have formed a bearish outside reversal candle as price action this week has engulfed last week’s high and low. BTC has failed to break through the 200-day exponential moving average (EMA) for four weeks in a row.
While the week began with optimism according to the candle pattern, it is now approaching a pessimistic close which is widely considered a bearish reversal. The doors are now open for a re-test of the 200-week moving average which at present is at $3,250. This is supported by the downward sloping 10-week MA.
Godbole’s view
Based on his technical analysis, Godbole predicts: “BTC risks breaching the bullish-higher low of $3,566 over the weekend. That would add credence to the bearish setup on the weekly chart and open the doors to $3,250 (200-week SMA). A quick recovery above $4,000 would abort the bearish setup, although the probability of BTC picking up a strong bid in the short-term is quite low. A convincing weekly close (Sunday’s UTC close) above the 200-week EMA $4,148 will likely put the bulls back into the driver’s seat and allow a stronger rally towards $5,000.”
Present situation
24 hours ago Bitcoin was trading at $3,635 according to CoinDesk data. The low has been $3,571 not quite at the $3,566 level mentioned by Godbole. The high has been just $3,642 with no sign of much recovery after the drop. The trading range is narrow. At 18:45 Central Standard Time the price was just over $3,600 at $3,607 down less than one percent, a little more than $27 dollars. So far on the weekend there is no significant movement either up or down. The present price of Bitcoin can be found here.
