A short term trend reversal for bitcoin has become increasingly unlikely for bitcoin following a 5% drop in less than three days.
Since October 1, the bitcoin price has fallen from $8,532 to $8,100 against the U.S. dollar.
Technical analysts anticipated a relief rally to key resistance levels found at around $9,000 as bitcoin initially rebounded from $7,700 to $8,532.
With the declining daily volume of the asset and no short term catalysts in sight, traders are preparing for yet another drop to the mid-$7,000 region.
Choppy waters, gloomy sentiment around bitcoin
As Luke Martin, a bitcoin trader and the host of Coinist Podcast said, many traders predicted the bitcoin price to see an upside movement to at least $9,000 after hitting a major support at below $7,000.
However, bitcoin has failed to push beyond the mid-$8,000 level to make its way towards $9,000, creating a difficult environment for bulls to try to push through the selling pressure.
He said:
“My BTC view has been to expect upside for BTC towards 9k. Could still happen. But with 3 failed pushes higher while retesting the same 8200 support this frequently, I have far less conviction in the level holding. Would rather be flat and jump onboard once we’re moving up.”
When bitcoin first dropped to $7,700, several indicators like the Stochastic Relative Strength Index indicated an extreme oversold condition for the asset, enabling bitcoin to break out of the sell off in the short term.
In the past week, technical indicators have not pointed towards a strong recovery as a result of oversold conditions or an abrupt increase in volume, increasing the probability of a retest of lower supports.
According to Messari, the Real 10 volume of bitcoin, which represents the verifiable daily volume of the asset, is hovering at merely $335 million, down substantially from July.
In July to August, when the price was hovering above $10,000, the Real 10 volume of bitcoin frequently remained above $1 billion.
Trader sets $6,700 as a target
A bitcoin technical analyst and trader known as Dave the Wave said that the medium term target of the asset is at $6,700.
The trader said that the bear trend of bitcoin is seemingly coming to close to bottoming out, testing lower levels of support on the way.
He said:
“Getting toward the business end now. A possible short term target at previous support then back down to the target in the more medium term target of 6.7K. ‘Possible short term target’ is code for gamble if you must. Medium term targets are for the investor/ position trader.Getting toward the business end now,” .
Across major trading platforms in the bitcoin market including BitMEX, short contracts have outweighed long contracts in the past several hours, indicating that traders are gearing towards a short term bear trend.
In the long term, many investors remain optimistic towards the trend of bitcoin, not dismissing the possibility of a recovery to record highs by the year’s end.