Bitcoin, after falling to levels below $10,000 this week, may face further losses ahead

The top cryptocurrency by market value rose to a 17-month high of $13,880 last Wednesday only to end the week on Sunday (UTC time) with a 0.66 percent loss at $10,760.

Essentially, BTC created a candle called “gravestone doji” on the weekly chart, which comprises of tall upper shadow (marking a big gap between the open and high) and little or no lower shadow (meaning low and close are almost identical).

The narrative behind the candle is that buyers had pushed prices up to unsustainable levels during a specific period, then sellers ended up pushing prices back to the starting point.

This sort of price action, if witnessed following a stellar rally, is widely considered a sign of bullish exhaustion and an early warning of an impending price drop. That may well be the case here, as the gravestone doji formed after bitcoin reached 17-month price highs.

• Bitcoin could fall below $10,000 this week as a strong sign of buyer exhaustion have emerged on the weekly chart in the form of “gravestone doji” candle.
• A bear cross of short-term moving averages and weakening buy pressure on the daily chart also suggest scope for a drop.
• The case for a price retreat into the four digits would weaken if bitcoin jumps above $12,450, invalidating a bearish pattern on the 4-hour chart. That would open the doors to a retest of the recent high of $13,880.

As a result, BTC could be quoted in four digits across cryptocurrency exchanges later this week. As of writing, the cryptocurrency is changing hands at $11,000 on Bitstamp, representing a 6.5 percent drop on a 24-hour basis. It’s worth noting investors may view any pullback to levels below $10,000, as just another chance to get involved in the bull market.

Weekly chart

BTC created a gravestone doji last week with the biggest red volume (selling volume) bar since November.

Further, the candlestick has appeared following a near 90-degree rise from levels near $4,000 seen at the beginning of April and the relative strength index (RSI) continues to report overbought conditions with an above-70 print. Therefore, the case for a price drop to $10,000 looks strong.

It is worth noting that the 5- and 10-week moving averages are still trending north, indicating a bullish setup. As a result, the averages, currently located at $9,840 and $8,757, could fuel a price bounce.

Daily and 4-hour charts

As seen on the daily chart (above left), the Chaikin money flow index has retreated sharply from 0.39 to 0.19 in the last five days — a sign of weakening buying pressure. The oscillator takes into account both the price and trading volume to gauge buying and selling pressures.

The 5- and 10-day MAs are also teasing a bearish crossover. Over on the 4-hour chart, meanwhile, the cryptocurrency has carved out a bearish lower high at $12,448.

Overall, both charts are aligned in favor of a short-term drop to levels below $10,000. The bearish case, however, would weaken if the price breaks above $12,448 with high volumes. In that case, BTC could revisit the recent high of $13,880.

Bitcoin then hit a low of $9,713 at 06:00 UTC — a level last seen on June 21 — before regaining some ground. At time of writing, one BTC is worth $10,200, down around 7 percent on a 24-hour basis, as per Bitstamp prices.

The drop saw BTC retrace more than 30 percent of gains from its 17-month high of $13,880 hit on June 26, and more than 60 percent of the four-week rally from lows near $7,500.

• Bitcoin has dropped below $10,000 for the first time in 11 days, reinforcing the buyer exhaustion signaled by the weekly chart, as discussed yesterday.
• The daily chart indicators have turned bearish, while the 4-hour chart is reporting a bearish lower-highs, lower-lows pattern. As a result, the price could slip further toward the former resistance-turned-support of $9,097 (May 30 high) in the next couple of days.
• A UTC close below $9,097 would invalidate the bullish setup on the daily chart.
• A high-volume break above the falling trendline on the 4-hour chart, currently at $11,100, would shift risk in favor of retest of the recent high of $13,880.

Bitcoin’s price drop is hurting the broader market as well. Only seven out of the top 100 cryptocurrencies by market capitalization are reporting gains at press time, according to CoinMarketCap.

That said, most of the losers are outperforming bitcoin, which was the 11th worst performing top-100 cryptocurrency of the last 24 hours, at 09:00 UTC. For instance, EOS and bitcoin cash (BCH) were down 3 percent, while cryptos like ether (ETH) token and XRP reported 6 percent and 4.5 percent drops, respectively.

As a result, a majority of alternative cryptocurrencies are reporting gains in BTC terms. The cryptocurrency market performance of the last 24 hours indicates the investors have likely begun rotating money out of bitcoin and into alternative cryptocurrencies.

With bitcoin’s technical charts signaling scope for a deeper drop toward key support at $9,097, altcoins may continue to shine bright in BTC terms.

BTC daily chart

With the 5- and 10-day moving averages reporting a bearish crossover and the 14-day relative strength index reporting bearish conditions with a below-50 reading, bitcoin appears on track to test support at $9,097 (May 30 high).

Supporting the bearish case is the recent drop in the Chaikin money flow index from 0.37 to 0.13 — a decline indicating weakening buying pressure.

The outlook as per the daily chart would turn bearish if the cryptocurrency prints a UTC close below $9,097, violating the bullish higher-lows and higher-highs pattern.

The case for deeper losses would weaken if the price finds acceptance above the June 27 low of $10,300, although as of now that looks unlikely.

4-hour chart

The previous 4-hour candle closed well below $10,300 (see yellow line), confirming a bearish lower-highs and lower-lows pattern.

The breakdown is backed by high sell volume (red bars). In fact, sell volumes have been consistently higher than buy volumes ever since BTC topped out at $13,800. As a result, a drop toward $9,097 looks likely.

The Chaikin money flow has turned negative for the first time since June 10 — a sign the cryptocurrency is now facing increasing selling pressure.

The outlook would turn bullish if the price clears the descending trendline hurdle at $11,100 on the back of strong buy volumes. That would open the doors to a retest of the recent high of $13,880. After all, the long-term charts are still biased bullish.