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Bull Exhaustion? Bitcoin Price Halts Advance Ahead of $6,000
Bitcoin prices have taken a downturn after the psychological hurdle of $6,000 proved a tough nut to crack.
Por Omkar Godbole
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After failing to breach $6,000, bitcoin prices have again taken a downturn.
At press time, the bitcoin-U.S. dollar (BTC/USD) exchange rate is $5,850, but of greater interest to traders is what this means for the ongoing rally, which has pushed bitcoin up from an Oct. 25 low of $5,376.
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Prices on the CoinDesk Bitcoin Price Index (BPI) have twice neared the $6,000 mark in the last 24 hours, yet both attempts have stalled.
The first attempt ran out of steam at $5,978 yesterday at 13:00 UTC, while a second fell apart at 01:00 UTC today.
As of writing, the BPI is down 0.90 percent at $5,834.
While the reasons for the exhaustion are unknown, it may simply be the case of the formation of a new psychological level, with traders unsure of whether higher prices above $6,000 will hold.
Whatever the reason, the price action analysis calls for vigilance.
Daily chart
The above chart shows:
- Bearish price-money flow index (MFI) divergence, indicating the rally ended with the Oct. 21 record highs above $6,100.
- Bearish 5-day moving average (MA) and 10-day MA crossover (i.e. 5-day MA cuts 10-day MA from above).
Exhaustion near $6,000 adds credence to the bearish price-MFI divergence and indicates potential for a drop below the 5-day MA of $5,786.
A break below $5,786 would validate the bearish 5-day MA and 10-day MA crossover and could open doors for a drop to head-and-shoulders neckline (red line) support of $5,440.
The rising trend line (blue dotted line) is also likely to offer support around $5,440 levels.
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As per CoinMarketCap, total bitcoin trading volume dropped 28 percent on Wednesday, and decreased by another 3 percent on Thursday.
This further suggests the rally from $5,376 lacked substance (weak volumes), thus the exhaustion near $6,000 is perhaps to be expected.
Looking ahead to today:
- The odds of a break below $5,786 and a drop to $5,440 levels are high.
- On the higher side, only a convincing move above $6,000 would open doors for new record highs above $6,200.
Tired runner image via Shutterstock
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