Bitcoin Plunges Below $10,000 in Major Blow to the Bulls
Bitcoin’s price was back on the defensive Tuesday after falling below a key psychological support, setting the stage for a bigger short-term reversal. The only saving grace is the presence of oversold conditions on the hourly chart, which means downside pressure could be fading – at least for now.
The bitcoin price breached $10,000 in overnight trading and eventually bottomed at $9,860.80 on Bitstamp. As of 8:41 a.m. ET, the BTC/USD exchange rate was down 3.4% at $9,982.
With the drop, bitcoin is back below the 30-period exponential moving average (EMA) on the hourly chart. In addition to price action, momentum has also weakened, with the relative strength index (RSI) touching a low of 30. The presence of oversold conditions may have stopped the bleeding for now.
Over the 24-hour trading cycle, bitcoin’s price is down an average 5.1% across major exchanges, according to CoinMarketCap.
At current values, bitcoin’s market capitalization stands at $178.3 billion. Its dominance rate is 65.1%.
The latest reversal, which appears to be technical in nature, marks the second time in as many weeks that bitcoin has lost the handle on $10,000. Less than seven days ago, bitcoin’s price plunged to the low $9,000 range amid signs of bullish exhaustion. The fall marked a 31% reversal from the prior high of $13,200 and a 35% retracement from the 17-month peak reached in June.
But it took even less time for the bulls to recover their previous position as the market added more than $1,000 in the span of just 30 minutes last Thursday. The sudden reversal was another strong indicator that the bears had been short-squeezed.
Some analysts are convinced that bitcoin will witness a bigger retracement back below the $9,000 level, a move that could invite a new wave of buyers back into the market. For bitcoin, declines of 30% or more are common during bull markets; each time, they allow bottom-pickers to add to their positions.
A drop below $9,000 would confirm a bearish head and shoulders pattern identified by technical traders last week.
Despite the recent pullback, the outlook on bitcoin in the medium- and long-terms remains unchanged. The largest cryptocurrency is benefiting from growing institutional demand, longer holding periods and anticipation for the upcoming supply crunch beginning in May 2020. Against this backdrop, one can easily argue that bitcoin will return to record highs at some point in the next 12 months.
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock. Chart via TradingView.