The last time I wrote about bitcoin, a number of comments, some positive but mostly negative and strongly worded, I suggested that the currency was due for long-term weakness. The post was written in February when bitcoin was trading around $10,000 and I suggested the cryptocurrency was heading lower, toward $4,200 and once that was breached, a deeper move lower ahead.
For bitcoin traders, the ultimate direction for the crypto is irrelevant, since it is just a question of trading long or short and using volume price analysis as the underlying methodology, which reveals the true balance of buying and selling. For investors, it has been a tale of woe, particularly for those drawn into the crypto bubble, which is now deflating.
Look at the daily chart, where the extended period of congestion in the $6,400 region offered some hope for longer-term investors and where the volume point of control now sits on the futures contract, with deep resistance overhead in the $6,600 region, denoted with the red dashed line on the accumulation and distribution indicator for NinjaTrader. The 14 of November proved to be the seminal day, with a wide-spread down candle on high volume as the sellers moved in strongly, driving bitcoin lower and repeated several times over the last couple of weeks with rising volume as the price waterfall developed, confirming the bearish sentiment now prevailing. The price patterns are typical, with each attempt to rally associated with narrow price action and high volume as the sellers continue to offload into weakness, with only minor support now in place in the $3,580 area.
So the question now for investors is what’s next? In the short term, we are likely to see a bounce as bitcoin looks cheap, given the heady days of five figures, delivering short-term rallies as a result. Longer term on the weekly chart from Investing.com, the next level of technical support is around $2,800, where the cryptocurrency may find some support, which could provide a solid platform. However, if this is also taken out, the next level is some way below. Much will now depend on investor confidence, which has been badly shaken. If investors believe that bitcoin will survive and flourish, this level could hold – if not, volume as always will reveal the true balance of sentiment and the future for bitcoin.