For the umpteenth day in a row, the Bitcoin ball has been in the court of bears. As of the time of writing this article, BTC has found itself trading for $8,200, managed to bounce slightly after the drop to near $8,000 seen on Monday. Still, the leading cryptocurrency remains down 0.72% in the past 24 hours, according to Coin Market Cap, as altcoins have posted similar losses across the board.
A number of analysts have said that $8,000 is a “make or break” point for the leading cryptocurrency; the next breakout could decide in which direction Bitcoin will be heading for the next couple of days, if not weeks and months.
Jacob Canfield, a professional Bitcoin trader and a popular Twitter personality, recently took to Youtube to explain why this price level does carry so much clout.
Long story short, according to the VPVR, a volume profile indicator that tells you price levels that have been historically important, $8,000 is the most-traded volume level of 2019. In fact, Canfield’s chart seemingly suggested that it is one of the most important price levels for Bitcoin of all time. “Price tends to gravitate to volume nodes; they act as support and resistance,” the analyst further explained, accentuating the importance of BTC holding $8,000.
While there is a bull case, a key indicator suggests that pain, meaning a collapse below $8,000, is more likely than a move higher:
The Bitcoin Hash Ribbons — an indicator that uses a long-term moving average of the hash rate and a short-term moving average of the hash rate to show how healthy the Bitcoin mining ecosystem is — has just seen a bearish crossover, or “inversion.” this is when the long-term level crosses above the short-term level, signaling that miners have stopped allocating resources to improve the security of Bitcoin.
Historical precedence hints that a collapse could follow suit.
More specifically, below is a chart from a cryptocurrency analyst, which shows the price action of Bitcoin just before and after the 2016 block reward halving. The inversion of the Hash Ribbons led to a 30% drop literally days after the signal flashed, then a few weeks and months of consolidation prior to an eventual breakout.
And in November 2018, the Hash Ribbons saw an inversion event just days prior to the start of the 50% drop from $6,000 to $3,000. Ouch.