Bitcoin has had a rough past two days, with its recent rally to highs of $8,400 resulting in yet another strong rejection that appears to have sparked another downtrend.
This downtrend has forced BTC back below $8,000, and it appears to be on the cusp of seeing significantly further losses as bulls go on the defensive and struggle to generate any further upwards momentum.
There are a couple key factors, though, that may signal that this latest selloff is simple a short-term event that will soon be followed by a continuation of the cryptocurrency’s recent uptrend.
Bitcoin Finds Support at $7,800 as Selling Pressure Alleviates
At the time of writing, Bitcoin is trading down just under 4% at its current price of $7,870, which marks a notable decline from its daily highs of just under $8,200, and an even further decline from its multi-day highs of $8,400 that were set at the peak of the recent rally.
Most analysts had anticipated that Bitcoin’s break above $8,000 would mark a turning point for the cryptocurrency, as it was able to find enough buying pressure above this level to hold it there for several hours.
Its strong and swift rejection at $8,400, however, signaled to analysts that this latest rally could have been a bear trap.
HornHairs, a popular crypto analyst on Twitter, spoke about this in a recent tweet, noting that a weekly close on Sunday below $7,870 will mean that BTC could retrace all the way to $6,000.
“$BTC We got the breakout, which was a good start, but as the weekly chart stands, it looks like a bull trap. If we close below $7870 on Sunday, my expectations will be a move down to $6k. Very important next few days. Nothing conclusive until Sunday,” he said while pointing to the below chart.
In spite of this, there are two factors that could signal that Bitcoin will soon see significantly further upwards momentum – with BTC flashing some bullish divergence on its RSI, and low conviction amongst sellers.
“$BTC: On the less negative side, the potential hidden bullish divergence with RSI is still intact on the 4 hour chart and volume has been decreasing with price since the top. That’s a sign of consolidation – price and volume are not in agreement. Low conviction selling so far,” Scott Melker, another popular crypto analyst explained in a recent tweet.
On the less negative side, the potential hidden bullish divergence with RSI is still intact on the 4 hour chart and volume has been decreasing with price since the top. That's a sign of consolidation – price and volume are not in agreement. Low conviction selling so far. pic.twitter.com/qEbAs2CBNo