Bitcoin Slips Back Below $8,000; Is a Major Correction Coming?

Bitcoin’s price swung lower on Tuesday, marking the third time in five days that the bulls failed to make a definitive break above $8,000. The largest and most influential cryptocurrency has been in a virtual holding pattern for going on one week, possibly signaling the end of the uptrend.

BTC/USD Update

After avoiding a bearish reversal on Monday, the bitcoin price was back on the defensive Tuesday, falling 2.8% to $7,788 on Bitstamp. Trading was limited to a $325 price range.

Bitcoin’s momentum has been zapped from under it, leading the relative strength index (RSI) below 50 for only the second time since February. Bitcoin is now fast approaching the 30-day exponential moving average (EMA), a critical long-term support zone. Since the uptrend began nearly four months ago, bitcoin has crossed below that level on only one occasion.

Bitcoin price
Bitcoin price losing momentum as the monthslong uptrend shows signs of fading. | Source: TradingView.

A failure to hold the 30-day EMA will likely invite greater bearish pressure, which would expose bitcoin to a harder fall, possibly below $7,000. On the opposite side of the ledger, the $8,000-$8,200 range represents the major resistance test.

Bitcoin’s price has been sliding along with its volume. According to data provider bitcoinity, volume began to trail off significantly in early June.

Bitcoin Volume
Bitcoin price and volume over the past 30 days. | Source: Bitcoinity.org

At current values, bitcoin has a total market capitalization of $138.4 billion. It accounts for 55.6% of the overall cryptocurrency market.

Calling All Whales

Although bitcoin has avoided a punishing reversal, price action over the past two weeks reflects a general loss of appetite among the market bulls. It may also reflect an unwillingness on the part of the so-called whales to push prices even higher.

Some of bitcoin’s largest accounts bought up a significant amount of BTC over the past four months, resulting in an epic short-squeeze that forced the bears to liquidate their positions. But once bitcoin crossed below $8,000, short-squeezing was no longer profitable.

For the majority of crypto observers, bitcoin probably needs a bigger short-term correction to trigger an organic bull market – one that would invite retail traders back into the fold. There’s no question that retail interest and overall trading volumes skyrocketed during the last uptrend, but many argue that was largely due to the whales’ oversized influence on the market.

From the perspective of network fundamentals and technology, bitcoin is much stronger today than it was several months ago. Unspent transactions, hash rate and efforts to boost scalability have all increased substantially since the year began.

Bitcoin’s ‘natural correction’ could be gathering steam after the cryptocurrency reported its fourth consecutive monthly gain. That’s the longest stretch of uninterrupted monthly growth in nearly two years. A pullback wouldn’t be out of the ordinary when looking at bitcoin’s dominant four-year cycles.

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.

Author:
Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi