Bitcoin (BTC) can drop to $6,000 again, but will it hold support?

Bitcoin (BTC) is still trading above its daily 100 EMA but the price action on the BTC/USD chart above looks extremely weak and unlikely to break past the downtrend resistance at this point. RSI and wave trend analysis of the daily BTC/USD chart shows that the price is more likely to break below the 100 EMA rather than going up to retest the resistance. So far, Bitcoin (BTC) has breached the 200 EMA and if it breaches the 100 EMA, it will then have to break the 50 EMA.

The volume on the daily chart is also showing signs of weakness which means if the bulls lose interest to get in at this stage, the bears can easily drag the price down to $6,000 again. At this stage however, what remains to be seen is whether Bitcoin (BTC) will test the support and bounce back to climb towards $10,000 (Scenario A) or will it break the support and fall lower to find a bottom at the long term trend line (Scenario B). If Scenario B follows through, Bitcoin (BTC) will still climb towards $10,000 after finding a bottom.

While these may seem like two different paths Bitcoin (BTC) can take to begin a new cycle, the reality is that both of these scenarios have quite distinct consequences. If Scenario A follows through and Bitcoin (BTC) tests support and then climbs towards $10,000, it is highly probable that the price will get rejected at this stage and Bitcoin (BTC) will once again be pushed down to find a bottom. This means that the price will have to fall lower to find a bottom at the long term trend line (shown in purple). On the other hand, if Scenario B follows through and Bitcoin (BTC) breaks the support to find a bottom directly on the long term trend line (shown in purple), it is highly probable that Bitcoin (BTC) will climb towards $10,000 and then break past $10,000 without having to retrace significantly.

The 4H chart for BTC/USD above shows Bitcoin (BTC) to be trading in a triangle. RSI conditions are in oversold territory as the RSI hovers between 30 and 40 which is considered as a choppy zone for trading. If the RSI climbs above 40 and the price starts to fall, it will lend confirmation to downward movement and the price can be expected to fall to $6,000 or lower. All technical indicators suggest that Bitcoin (BTC) will trade sideways for the next few days before falling down significantly.

Most investors who are new to this market or haven’t been around for long would find this correction to be overextended and some might even call it a bear market. However, the fact of the matter is that Bitcoin (BTC) is going nowhere before finding a bottom. Some investors easily fell for the ETF hype because the correction has been going on for long and many expect a reversal soon, but professional investors know that before Bitcoin (BTC) puts in a bottom, there is no new cycle and therefore no new money to push the price higher.