Bitcoin (BTC/USD) price has just made new yearly low. The cryptocurrency fell another -2.17% on the day to $3224 (Bitfinex), with most of the market following suit. While it might seem like this break of support was critical, so far, the resulting drop has been unconvincing. This could point towards a new potential trading range, similar to the one experienced between ~$6000-$7000. Whether you’re a buyer, seller or a HODL’er here are a few indicators to consider before moving forward.
The Last Line of Defense for Bitcoin
The Weekly 200 Moving Average is putting up quite a fight for BTCUSD. In technical analysis terms, it is known as the last line of defense for any asset. We can see that the price is hovering right near support on a weekly timeframe.
Sellers should be practice caution as merely touching the 200 MA can deliver a 161.8% pullback on smaller timeframes. A pullback could take BTCUSD back to the resistance $4400 area. Overall, a break below the 200 MA is acceptable as long as the price doesn’t close below it on a weekly basis (a wick is also an acceptable close).
Note: The weekly Relative Strenght Indicator (RSI) has reached an almost identical oversold level (28.96) as in the 2015 Bitcoin bear market (28.14).
The 4-hour BTC/USD chart looks more promising for the bulls. At least for the short term. The RSI bullish divergence should be enough to cause a small relief rally and potentially a stronger overall reversal if it manages to break above the $3700 resistance cluster. With the weekly oversold levels reaching ATL levels a bounce to ~$4200 would not be out of the question.
BTCUSD An Overcrowded Short?
The BTCUSDSHORTS margin shorts (Bitfinex) have managed to break their all-time highs from September. Without a doubt, BTC/USD has become an overcrowded short. It doesn’t appear that short sellers are looking to close their positions, and that’s understandable, why should they? Bitcoin hasn’t seen a decent spike in weeks so we expect short squeeze to come sooner rather than later.
While currently, Bitcoin price might look bearish, there are more than a few indicators that tell a different story. If you’re still holding, this might not be the best time to panic sell.