Downtrend Continues as Bitcoin Shorters Get Action

Last week, we saw Bitcoin's consolidation pattern pointing towards a potential big move on the horizon with technicals “leaning bearish”. We also said the USD3,425-3,450 range was a key level to watch.

After hitting a high of USD3,614 last week, Bitcoin (BTC) fell through the previously mentioned price range and landed at USD3,340.

With the bears back in force, traders will want to be cautious how they play the bear market, which some will continue to short Bitcoin.

Bitcoin makes lower highs and lower lows

After hitting the low at USD3,340, BTC railled up to USD3,470 before getting promptly rejected at the 4-hour EMA20 (red line).

Later in the week, another bullish movement formed before a second rejection at USD3,458. The USD3,425-3,450 range had been a key resistance level to watch.

Even though BTC broke through this level, it is once again encountering major resistance.

Zooming in to the 1-hour chart, the volume indicator is leaning slightly bullish.

Compared to the overall trend over the last few weeks, BTC appeared to have more support on the buy-side this past week.

Volume drop-offs occurred more often during corrective price action following high-volume bullish movements.

Before the most recent EMA20/40 cross on the 1-hour chart, we can see a big move to the upside with four bullish candles, which is followed by a shallow correction.

It’s interesting to note that BTC did not even touch the EMA20 or EMA40 during this corrective move.

Instead it is followed by five successive bullish candles. This suggests that there is a bullish bias in the short term.

Last week, CBOE’s withdrawal of the VanEck-SolidX Bitcoin ETF failed to act as a bearish catalyst. Similarly this week, CBOE's announcement of re-filing the application did not impact the market.

This suggests that market participants simply don’t care that much about the status of an ETF right now.

Zooming out to the daily chart, we can see the continuation of a possible bearish pennant breakdown. Here is the BTC/USD 1D chart that we shared last week.

BTC’s price action on the daily chart this week suggests this possibility is still very much in play.

On higher time frames, it’s clear that BTC has been making lower highs as well as lower lows.

Without a large bullish move on the daily timeframe, a bullish case for the medium long term may not make sense.

A slow crawl down to the USD3,100-3,200 range for another double bottom test may be more likely.

XRP gets a boost

Out of the Big 3, XRP was the best performer this week.

After hitting a low of USD0.2815, XRP made an 18% move up to USD0.3334.

Many have credited the short-term price rise to Ripple CEO Brad Garlinghouse’s recent statements about the possibility of Ripple working with SWIFT, the financial messaging system responsible for USD5 trillion in daily transaction volumes between banks and other institutions.

Interestingly enough, SWIFT later announced that it is actively working with R3, a Ripple competitor, to trial a distributed ledger technology (DLT) solution that integrates with SWIFT GPI.

Following the 18% price rise, XRP retraced 12% down to the 0.786 Fibonacci level at USD0.294.

XRP is currently in a sideways consolidation pattern between the 0.5 and 0.618 Fibonacci levels.

Conclusion

Zooming out to view a larger market structure, we can witness a very bearish retrace.

As you can see in the image below, XRP has retraced nearly 100% since its bullish run up in mid-December, which could also be a contributor to XRP’s relatively positive performance this past week compared to BTC and ETH.

BTC and ETH are both flirting with the 0.768 Fibonacci level.

If XRP’s recent performance is any indicator, there’s no reason to believe why the 0.768 will hold for BTC and ETH without a major bullish catalyst to kick off a significant buy-session for bulls.

With BTC finding major resistance at USD3,450, it’ll be important to see how it reacts with the 0.768 Fibonacci level at USD3,365.

A confirmed break of this level would be extremely bearish.

With the clear decline and potential bearish pennant formation, a 100% retrace for BTC back to USD3,100-USD3,150 appears to be a very real possibility over the coming weeks.