Bitcoin sinks below $6,000 – What’s next?

Bitcoin, Weekly and Daily

The Turkey crisis continues to weigh on sentiment amid the ongoing stand-off between Ankara and Washington and as Turkey’s central bank continues to hold off with the sharp hike in rates that many feel is necessary to get markets under control. As risk-off went to the next level today, with the Turkish Lira diving to new record lows, the Dollar and the Yen rose while the Euro, the Australian Dollar and other currencies dropped.

This, in turn, sparked risk aversion in emerging market currencies, which remained under pressure though as traders work their way through the implications of the Turkey crisis. European Stocks are on the up alongside US Futures, and most stock markets rallied in Asia, though Chinese markets were an exception, following sub-forecast retail sales and investment data.

Hence, as markets tend to give more emphasis on the negative news, we have seen the typical safe haven Gold, declining below the $1,200 barrier, along with most of the cryptocurrencies. In general, cryptocurrencies tend to be affected by global equities performance but also react on major political and geopolitical events. As trade tension grows, while most stock markets found a footing in Asia, and USA500 futures are showing a 0.3% gain, reversing most of yesterday’s regular-session’s losses, Bitcoin’s demand decreased further.

More precisely, the price fell by nearly $352.00, below the $6,000.00 barrier, since yesterday night. Bitcoin’s dip is mainly affected by the strength in the US Dollar, but also amid general pressure as the crypto-currencies are already under notable pressure since July 25. Hence as Dollar strength remains the main driver of the market, the “wanna be” safe haven asset, i.e. Bitcoin, declined for a 3rd consecutive day.

The cryptocurrencies’ performance seems to currently present an identical picture with the rest of the US Dollar crosses, while this is likely to continue in the near future, since despite the impact of US sanctions, strong US Q2 earnings and forecasts for continued solid growth in Q3 should also be supportive of the US Dollar. 

So far today, Bitcoin is seen consolidating within a 6-month Support area at $5,783-$6,000. This recent attempt to spike lower and break year’s Support, rise some downside concerns for Bitcoin and in general cryptos. However this is too early to be said, since the pair holds a strong foot at the 76.4% retreat this year (Fibonacci retracement set from 2017’s bottom up to coin’s record high.)

The price action has since been moving in a wild stroll since the giant rally at the end of December, down to more national levels, by creating lower peaks. From a technical perspective, the asset formed a descending triangle, which is considered to imply the continuation of the asset’s move.  Meanwhile, daily and weekly momentum indicators are bearish  and point to more weakness in the near future. The weekly RSI is holding below neutral zone, without any significant rise since January 28. The MACD extends its lines to the downside but remains in line with its signal line, suggesting that only a more decisive move southwards could confirm the increase of bearish sentiment.

Hence only the breakout of triangle’s trendline and 6-months Support level at $5,783 (also 150-day SMA), could open the doors to the downside, with next Support at $3,500-$2,911.00 ( at 150-day SMA and October 2017 low).

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Andria Pichidi

Market Analyst

HotForex

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