Bitcoin Price Drops Below $3,500, But Is Relief Rally In Sight?
The bitcoin-US dollar exchange (BTC/USD) rate fell to a fresh four-week low of $3,413 this morning following reports that Shanghai-based bitcoin exchange BTCC will shut down its domestic trading operations effective September 30.
As such, the announcement is the latest that supports the rumor regulators are preparing a formal ban on domestic bitcoin exchanges. Long liquidations in BTC markets have gathered pace amid fears that a confirmation from the People's Bank of China will follow over the next few days.
According to data from CoinMarketCap, bitcoin's price has shed 11 percent over the last 24 hours. The drop seen today has taken the week-on-week losses to 24 percent. Month-on-month, the cryptocurrency is down 19 percent.
Though driven lower by the bearish news flow, the sell-off should not come as a surprise as price action analysis favors the downside toward $3,000.
Let's have a look at new developments on the technical charts that corroborate the bearish view presented 24 hours ago.
Daily chart
Yesterday's price drop was accompanied by the highest volume since July 20. This indicates that the sell-off has substance and corroborates the bearish bias.
Bitcoin closed below the 50-day moving average for the first time since July 20.
The 38.2 percent Fibonacci retracement level has been breached to the downside. The 50 percent Fibonacci retracement level stands at $3,398.
Weekly chart
The chart above shows the 10-week simple moving average (SMA) is still sloping upwards, which indicates that the sell-off from the record high of $5,000 is a healthy technical correction. Moreover, at $5,000, the rally looked overstretched with the 10-week MA lagging significantly.
Confluence of key Fib levels is noted at the $3,400 levels [38.2 percent Fib retracement of the March low – September high and 50 percent Fib retracement of the July low – September high].
View
Bitcoin has already retracted close to 50 percent of the July–September rally. With the 1-hour and 4-hour RSI hovering in the oversold territory, the dips below the upward sloping 10-week SMA could be short lived.
A move higher to $3,750-3,800 cannot be ruled out before another round of sell-off unfolds.
In the long-term, BTC looks set to test $3,000 levels.
Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.
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Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.