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Bitcoin broke below a short-term consolidation pattern and is making its way down to test the bottom of the falling wedge on its daily time frame. Another break lower could expose this cryptocurrency to a steep free fall.
But if bulls defend the floor like they usually do, price could recover to the top of the wedge around $6,000 or at least until the areas of interest nearby. The 100 SMA is below the longer-term 200 SMA, though, so the path of least resistance is to the downside. In other words, support is more likely to break than to hold. Then again, the gap between the indicators is narrowing to reflect slowing selling pressure.
In addition, stochastic is indicating oversold conditions or that sellers are tired. Allowing buyers to take over could keep support in play and a bounce possible. The oscillator would have to pull up from the oversold area to confirm this though. RSI is also in the oversold region and appears to be bottoming out, signaling intention to head north and for bitcoin to follow suit.
It has been a rough couple of weeks for bitcoin and its peers, and the low liquidity in the Thanksgiving holidays is spurring additional volatility. Traders also likely jumped out of long positions for fear of further losses in bitcoin price.
This selloff is seen to have started on the Bitcoin Cash mining wars then exacerbated by the SEC ICO crackdown and of course FUD sentiment in the markets. Analysts are also scaling back bullish forecasts, with many highlighting how it could take a longer time to unwind these losses.
To top it off, expectations for institutional inflows early next year have also been pared as banks and funds are unlikely to ramp up bets in this environment. For now, bulls could keep holding out until a strong positive catalyst is seen.
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