Yahoo Finance Bitcoin Risks Return to December Lows After Price Drop to $3.5K
After breaching key support on Sunday, emboldened bears could soon push bitcoin (BTC) prices back towards $3,100.
Following a drop to a 3.5-week low of $3,476 at 16:00 UTC yesterday, the cryptocurrency closed at $3,516, effectively invalidating the bullish view put forward by the higher low of $3,566 carved out on Dec. 27.
That move also added credence to the bearish reversal signaled by the 9 percent price drop witnessed last Thursday.
Bitcoin Will Still Bite the Dust
Put simply, the bears have strengthened their control of the market, after the bulls failed to penetrate the head-and-shoulders neckline resistance of $4,130 and build a stronger rally last week.
As of writing, BTC is changing hands at $3,530 on Bitstamp, representing a 2 percent drop on a 24-hour basis.
Daily chart
As seen above, BTC found acceptance below $3,566 (Dec. 27 low) yesterday, validating the bearish doji reversal confirmed on Jan. 10.
The 14-day relative strength index (RSI) is reporting bearish conditions at 42.00, having breached the ascending trendline last week. Further, the 5- and 10-day moving averages (MAs) are trending south, indicating bearish setup.
Bitcoin Price Looks South After Worst Daily Loss Since November
So, it could be argued that the recovery rally from the December low of $3,122 has only ended up recharging the engines for a fresh sell-off.
3-day chart
BTC’s fall back to $3,500 has invalidated the positive view put forward by the three-day bullish outside-reversal candle of Dec. 20.
Moreover, the cryptocurrency’s failure to produce a significant price rally despite the positive divergence of the RSI, confirmed on Dec. 14, indicates that the bearish sentiment is still quite strong.
Weekly chart
On the weekly chart, BTC has created a bearish outside-reversal candle (last weekâs price action engulfed the previous weekâs high and low) signaling a resumption of the primary bearish trend, as represented by the downward sloping 10-week moving average (MA).
View
BTC could re-test the 200-week MA of $3,266 in the next few days and could extend the decline to the December low of $3,122.
A weekly close (Sunday as per UTC) below the 200-week MA of $3,266 would open the doors for a deeper drop below $3,000.
Acceptance above the downward sloping 10-week MA, currently at $3,919, would abort the bearish view.
 Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin image via Shutterstock; Charts by Trading View
