Bitcoin (BTC) dropped hard in the last 48 hours and is now trading under $9000. This has led to a growing concern among most analysts that this is not over yet. We may still see further downside because Bitcoin is not out of the woods yet. This might appear like one of those moments when analysts slightly alter their charts to completely change their previous analysis which has led to many investors remarking that technical analysis does not work with cryptocurrencies. This is simply not true. The purpose of technical analysis is to highlight possibilities. Many professional analysts stated earlier that Bitcoin (BTC) has broken the downtrend resistance line but very few of them actually said that Bitcoin is out of the woods. In fact, the rapid big spikes which resulted in an overbought RSI alarmed many who realized that the price of Bitcoin (BTC) has to close above the downtrend resistance line on the weekly chart in order for Bitcoin to be in the clear.
The weekly candle has yet to close above the downtrend line. It traded significantly above the downtrend resistance line (log scale) for quite some time which gave many a false sense of optimism but the fate of Bitcoin (BTC) in the near term hinges on how the weekly candle closes. Should the candle close below the downtrend resistance line, we may expect further downside possibly all the way to $6000 or lower. On the other hand, if Bitcoin (BTC) closes above the resistance line, it will give a green light to most investors to load up.
While Bitcoin has suffered losses in the past two days which have erased part of its exuberant gains made after the expected recovery, it is pertinent to note that most altcoins have had double digits losses in the meanwhile erasing significant gains. This is normal when you consider that altcoins are the first to record double digits gains as well as double digits losses. Trading altcoins is like trading Bitcoin with leverage, with the added advantage of diversification and huge gains but whichever way Bitcoin (BTC) goes, the rest of the market has to follow. Despite all the positive news regarding crypto markets in the past few days, many seem prepared for an upcoming short term bearish setup. Many analysts have recently increased their price predictions for Bitcoin (BTC) and prospects seem brighter than ever in the long term.
While most technical indicators favor a rise to $11,000 from here, it is good practice to be prepared for all eventualities. Bitcoin (BTC) appears neutral to bullish but there is not much to suggest a bearish outlook for at this stage. However, a close below the downtrend resistance line on the weekly chart could result in some quick movements. There is a lot of excitement and fear of missing out in the market as of now and any fall below these levels will most likely be met with big buy orders from savvy investors.