After a 20% gain since halving, a sharp 5% drop in Bitcoin price provided a necessary retest of key support while most buying interest is still further down.
At 2 A.M. (UTC) time Bitcoin (BTC) price abruptly dropped 5.11% to $9,256 before recovering to trade in the $9,500 range. This followed a previous sudden drop on Thursday after BTC briefly touched $10K to fill the CME futures gap.
Crypto market weekly price chart. Source: Coin360
Data from CoinMarketCap shows that earlier in the day the price surged to $9,939 and the following consolidation of higher lows and lower highs convinced some traders that further continuation to $10K and above was in the works.
BTC USDT 1-hour chart. Source: TradingView
After the surge to $9,939, traders were watching to see if $9,650 would function as support and the break below the pennant trendline and 20-MA dropped the price below a high volume node on the volume profile visible range.
BitMEX XBTUSD Liquidations. Source: Skew.com
Data from Skew shows the drop to $9,256 liquidated $28 million in BitMEX long positions but as discussed in a recent analysis, after a more than 20% rally since May 11, Bitcoin price was expected to retest former resistance levels to see if they had truly flipped to support.
The 1-hour chart suggests that a period of consolidation at $9,200-$9,300. At the time of writing the RSI is flat in neutral the neutral zone (50) and the MACD histogram remains negative. The Chaikin Money Flow oscillator also remains below 0 and the price continues to notch lower highs.
Scalpers will note that on the 30-minute chart Bitcoin price is already in the midst of an oversold bounce but sustained purchasing volume will be the indicator that will provide the best signal.
Bullish scenario
Despite the $500 correction, Bitcoin’s price is still above the ascending trendline from the recent low at $8,200. In the day leading up to and also during the halving, the price dropped to this trendline, and today’s pullback to $9,256 tapped it again.
If the price can hold above $9,300 and work its way back above the 20-MA on the 1-hour chart, bulls will be ready to attempt a push back above $9,600.
Bearish scenario
BTC USDT 4-hour chart. Source: TradingView
Looking at the 4-hour chart, if Bitcoin price falls below the ascending trendline and fails to find support at $9,200, a drop to the 100-MA at $9,000 is likely.
The VPVR also shows a high volume node at $8,894, which is slightly below the 100-MA, so in the event that the price falls below $9,000, traders will likely look to open positions at this level.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
