Bitcoin was rejected on its test of the area of interest visible on the 4-hour time frame and might be looking to revisit the floor. Applying the Fibonacci extension tool on the latest pullback shows that the long-term support lines up with the 38.2% extension around $5,900.
Stronger selling pressure could take it down to the 50% extension closer to $5,600 or the 61.8% extension at $5,268. The 78.6% extension is at $4,821.50, and the full extension is closer to $4,250.
The 100 SMA is safely below the longer-term 200 SMA to confirm that the path of least resistance is to the downside. This confirms that the selloff is more likely to resume than to reverse. In addition, the gap between the moving averages is widening to reflect strengthening bearish momentum.
However, the price is moving inside a short-term rising channel also and would need to break below the current support level to confirm that bears are winning out. Another bounce to the top could lead to an attempt to break past the swing high and 200 SMA dynamic resistance.
RSI is pointing down to show that sellers have the upper hand and could, therefore, push the price of Bitcoin to the downside targets. There’s still some room before the oscillator hits oversold levels, so bears could stay in control for much longer. Stochastic is also pointing down but nearing oversold territory. Pulling back up could bring buying pressure in.
Bitcoin suffered another sharp drop on the heels of the SEC decision to reject bitcoin ETF applications from ProShares and a couple more companies. This has led market watchers to speculate that their ruling on the next set of applications in September might not be an approval either.
It also represents a setback in the industry which is still trying to gain legitimacy and support from regulators. Traders also seem disappointed that it will take longer before crypto-based securities make their way to the mainstream market.
Images courtesy of TradingView.