For the second day in a row, Bitcoin declined, falling from to $10,150 since finding a local top at $10,550 earlier this week.
After this more-than-3% drop, analysts are becoming convinced the cryptocurrency will see a deeper pullback, citing a variety of technical analysis- and charting-related reasons.
Bitcoin Could See Strong Pullback
Over the past 60 days, since bottoming at $6,400 in the middle of December, Bitcoin has been on a near-relentless surge higher. At the local peak, the cryptocurrency was trading just above $10,500, marking a gain of 64% in two months’ time.
Unfortunately for bulls, the game is over, at least for now.
Nik Yaremchuk, an analyst and researcher at cryptocurrency fund Adaptive Capital, noted that with Wednesday’s candle closes, the one-day and two-day (and five-day, as noted by another analyst) Bitcoin charts are printing simultaneous sell signals: the TD Sequential has printed a green 9s on both time frames.
This is more bearish than bullish because, for those unaware, the time-based TD Sequential prints 9 and 13 candles at reversal points in markets, for it signals that the trend is exhausted.
The assertion that Bitcoin will soon see a pullback has been echoed by Bloomberg.
The outlet wrote in a recent article that BTC could drop further from here simply because last time it crossed the key psychological level of $10,000, it struggled:
It similarly struggled with that level in September when it crossed $10,000 — the month that followed saw it lose more than 14%.
Bloomberg added that the “token is overbought based on the 14-day relative strength index (RSI), which crossed the 70 mark.” The RSI defines an asset being overbought when the metric passes 70.
As to where the potential downtrend could take Bitcoin, Yaremchuk has eyed $9,500 to $9,300, pointing to the fact that there exists a “stronger support loop” in that region.
This target has been echoed by a number of other analysts who have suggested Bitcoin is overbought, such as Mayne, who said that he expects an approximately $1,000 scaling back from the price region around $10,000.
$10,500 is Key for Bulls
For the near-term bull case to be validated and for the aforementioned bear scenario to be invalidated, analysts say Bitcoin has to retake $10,500, a point just 3% above the current price, on a daily or weekly basis.
Prominent technical analyst Cred — who sports over 140,000 followers — remarked that since $9,500 has been breached, Bitcoin’s nearest resistance is $10,500, the midpoint of the tried-and-true range between $9,500 and $11,500.
So far, the cryptocurrency has rejected that level.
Though, Cred remarked that if Bitcoin can confirm a close above $10,600 — just a smidgen above the resistance he identified — prices will continue higher, likely unfettered until the other long-term resistance he identified at $11,500.
Close above $9500 took price back within old weekly range.
Now at resistance around range midpoint (~$10500).
Not chasing this daily engulfing, will be waiting for deeper pullback ($9500) or daily continuation >$10600.
— Cred (@CryptoCred) February 11, 2020
$10,500 is also important because this price point was the top of Bitcoin’s rally in September 2019, which was caused by China’s embracing of blockchain technologies in an unexpected fashion.
A strong failure to break past the previous swing high, analysts say, would mark a swing failure pattern (SFP) candle, which would likely mark the top for the ongoing Bitcoin rally should it form.
Long-Term Bull Trend Intact
Whatever happens with Bitcoin in the short term, analysts say the cryptocurrency remains in a long-term bull trend.
Per previous reports from Blockonomi, in a recent interview with CNBC, Fundstrat Global Advisors’ in-house crypto bull Tom Lee said that he expects for Bitcoin to rally to $40,000, citing a confluence of extremely positive fundamental factors, including but not limited to the impending U.S. presidential election, Bitcoin becoming a safe haven due to macro trends, and supportive central banks that are cutting rates across the field.