Bitcoin's price risks deeper losses below $8,000 as the bears seem to be winning a four-day-long tug-of-war with the bulls, technical studies indicate.
At press time, BTC is changing hands at $7,950 on Bitfinex – down 2 percent in the last 24 hours – having clocked a low of $7,968 earlier today.
The cryptocurrency was largely restricted to a narrow range of $8,300 to $8,050 since late Friday. Consequently, Bollinger bandwidth – a volatility indicator – dropped today to the lowest level since October, as per the short duration technical chart.
Hence, we could be in for a big move as a prolonged period of low volatility (range bound activity) usually makes way for a big move on either side.
That said, the big move could happen to the downside as the bull case has weakened following BTC's failure to capitalize on a descending broadening channel breakout witnessed on Friday.
4-hour chart
The above chart shows:
The bulls failed to capitalize on the descending broadening channel breakout, leaving doors open for the bears to make a strong comeback. Bollinger Bands breakdown (standard deviation of +2, -2 on the 20-candle moving average) – a bearish setup. A downside break of the trading range – bearish pattern. BTC has found acceptance under the support of the 50-candle moving average (MA). The relative strength index (RSI) has adopted a bearish bias (dropped below 50.00).Clearly, the technical chart is aligned in favor of the bears. Further, the decline could be sharp, a key volatility gauge indicates.
4-hour chart Bollinger bandwidth
The volatility, as represented by the Bollinger bandwidth (gap between the bands) on the 4-hour chart, fell today to its lowest level since October. As stated earlier, an extended period of low volatility is usually followed by a big move, which is seen happening to the downside.
As a result, BTC could suffer a deeper drop below the $8,000 mark.
View The current 4-hour candle will likely close below the lower Bollinger band, confirming a bearish breakdown. In this case, BTC is seen falling to the ascending (bullish) 100-candle MA on the 4-hour chart, currently located at $7,609. A daily close (as per UTC) below the 100-day MA support of $7,591 (former resistance) would signal a short-term bullish-to-bearish trend change. The bulls are seen making a comeback if BTC finds acceptance above $6,300.Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin image via Shutterstock; Charts by Trading View
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