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Bitcoin previously formed a bearish flag pattern and has since confirmed the continuation signal. Price has also closed below the bottom of its falling wedge formation, hinting that further declines are in the cards.
The 100 SMA is below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. In other words, the selloff is more likely to gain traction than to reverse. The 100 SMA dynamic inflection point coincides with the wedge resistance to add to its strength as a ceiling.
Stochastic is heading lower to indicate that sellers have the upper hand, but the oscillator is approaching oversold levels to signal exhaustion. Turning higher could indicate that bulls are returning and that a pullback to nearby areas of interest might be due. In that case, bitcoin could retest the broken wedge support around $5,000 before resuming its slide.
Note that the wedge spans $5,000 to around $10,000 so many fear that the resulting slide could be of the same size. Analysts have already pointed out that it could take months to undo the sharp slide in the previous week, so it would take much longer to recover with this recent drop.
Many pin the blame on the uncertainty spurred by the Bitcoin Cash hard fork on the rest of the altcoins while some are also pointing to the SEC announcement that two operators of ICOs violated securities laws. With that, more folks might be worried that exchanges and other operators could be targeted by regulators in the weeks ahead.
This also spells weaker hopes for bitcoin ETF approvals as the end of the regulator’s public comment period might mean that they’re ready to issue rejection. Reports that chipmakers saw weaker sales of cryptocurrency equipment also signaled a bearish outlook for bitcoin, so investors are trying to jump out of their positions.
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