Bitcoin had formed lower highs and higher lows to consolidate inside a symmetrical triangle on its 4-hour time frame before breaking to the downside. This signals that bears have won over and that further declines are underway.
The chart pattern spans $5,800 to around $8,400 which means that the selloff could last by the same height. The moving averages are still oscillating to reflect consolidation action and have yet to catch up to the latest drop.
RSI has reached the oversold region, though, indicating that sellers are feeling exhausted. However, it has yet to turn higher to reflect a return in bullish pressure. Stochastic is also indicating oversold conditions and looks ready to turn back up. In that case, a pullback to the broken triangle bottom could ensue before the drop resumes.
Analysts pin the blame on the “crypto civil war” going on related to the Bitcoin Cash hard fork that has carried over to the rest of the industry. This has led bitcoin’s market capitalization to fall below the $100 billion mark, a level not tested since October 2017. Of course the initial drop was followed by even more selling as stops were likely triggered and other traders reacted as well.
While bulls typically defend support levels strongly buy waiting to buy on dips, it’s likely that this selloff could gain a bit more momentum while uncertainty persists and other traders catch up to the slide. To top it off, persistent risk-off flows in general financial markets might also keep dragging on riskier assets like cryptocurrencies.
Still, some say that this is just a short-term panic and that long-term bitcoin factors look bullish. After all, investors are waiting to see more institutional investments early next year and are also hopeful that the SEC could approve bitcoin ETF applications.