- Bitcoin reignites the downtrend on breaking the flag pattern support.
- Bitcoin buyers have no choice but to camp at $7,000 and force an upward correction.
Bitcoin is extending the bearish leg from the levels we explored on Tuesday. If you look back, giving up the range support between $7,400 and $7,500 has proved to be a bad move for Bitcoin. Moreover, the upward correction has continued to be limited especially with the 50 Exponential Moving Average (EMA) on the 4-hour chart and the and the 100 EMA standing in the way.
The Impact of The Bearish Flag Pattern
The recovery from the recent low at $6,530 in November scaled the levels above $7,900. However, lack of steam left the crucial zone at $8,000 untested. The buyers, demoralized by the failure gather enough upward strength, disappeared into hibernation leaving a wide-open gap. The bears took advantage of the hibernating bulls to revenge, pushing Bitcoin towards $7,000.
XBT/USD 4-hour chart
The retracement has broken the bearish flag pattern support. Reaction to this pattern usually resumes the previous trend. In this case, XBT/USD is likely to refresh the lows under $7,000 heading to $6,500. However, if the buyers can make $7,000 impenetrable, an improving technical picture could reignite action in the direction of $8,000.
Meanwhile, the recent retreat suggests that $6,500 was not the bottom Bitcoin is looking for. The lack of enough volume and low volatility levels indicate that the contract upside will continue to be limited. At the same time, the hunt for a formidable bottom will continue in anticipation of the a New Year’s rally.
XBT/USD Key Levels
BitMEX index price: $7,135
Volume: $1.4 billion
Open interest: $680 million
Trend: Strongly bearish
Support $7,000, $6,750 and $6,500.
Resistance: $7,200, $7,400-$7,500.
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Source: Coin Gape