Despite the recovery of the bitcoin price by $700 in the past 48 hours, traders like DonAlt expect a deeper correction in the short term.
The bitcoin price dropped to the $7,000 region twice in the past week, dipping to as low as $7,688 on September 30.
While bitcoin attempted to break above important support levels following its recovery to $8,500, it has not been able to sustain upside momentum.
Deeper correction possible for bitcoin
From its yearly high at around $14,000, a pullback to the $7,000 region already indicates a near 50 percent drop within a span of merely three months.
The depth of the pullback and key technical indicators demonstrating oversold conditions as the bitcoin price made its way below $8,000 led technical analysts to predict a relief rally to occur.
However, as said by DonAlt, technical analysts have started to favor the theory that the move from $7,700 to $8,510 since September 29 signals consolidation subsequent to a steep decline, raising the possibility of a larger drop in the short term.
“$7,700 hit and bounced a little. I’m still not convinced that we’ve bottomed. Just looks like consolidation after a big drop. Bulls have to prove themselves here by closing back above 8750. Until then this looks [poor],” he said.
Various momentum oscillators and indicators including the Stoch Relative Strength Index (RSI) are no longer showing oversold conditions for bitcoin on larger time frames like the 4H and 8H candles, which suggests that a further downside movement has become increasingly likely.
Traders have also become more cautious on predicting a short term trend reversal for bitcoin considering the intensity of the drop over the weekend, with Josh Rager stating that only a close above $8,800 would result in a trend reversal for the asset.
“BTC seems to have found a support that it likes at $8k. Will continue to watch order books and how price reacts up at $8750-$8800 if it makes it up there Expect more down but sideways is expected after a violent dump. Would flip more bullish with a close above $8,800.”
With the expiration of CME bitcoin futures contracts on Friday, the start to this has been an ideal period for the cryptocurrency market to rebound and reclaim crucial support levels.
The global bitcoin market tends to see upside movement following the closure of CME bitcoin futures markets based on historical data, which also contributed to the improvement in the sentiment around the market.
Still, the relief rally of bitcoin seems to have peaked at $8,510 and without more upside price action, the asset is at risk of testing lower supports throughout October, decreasing the probability of seeing a new record high by the year’s end.
The altcoin market, as seen by the strong performance of Ethereum and EOS, has shown a strong recovery in the past 24 hours but as bitcoin struggles to break above $8,500 and reclaim $8,800, in the near term, technical analysts are likely to favor a downside movement.
Trend is down
In late September, global markets analyst Alex Krüger suggested that the short term trend of bitcoin turned bearish after its move to the $8,500 level, saying that the downside movement was quite clear.
“My BTC long bias proved to be wrong. It’s OK to be wrong, it’s not OK to stay wrong. The downside in the event of a move to the lower $9000s was massive and crystal clear. FAST means FAST,” he said.
The short term trend of bitcoin has noticeably turned bearish and if the daily volume of the cryptocurrency market fails to pick up in the upcoming days, sell pressure could continue to build up despite signs of a turnaround.
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