Capitulation? Bitcoin's Price Dropped 36% in November

Bitcoin BTC$88,500.33 tanked in November on the back of high volumes, raising the possibility that the market has, to some extent, capitulated.

The largest cryptocurrency by market capitalization is currently trading at $4,000 – down 36 percent from its monthly opening price of $6,318 – according to CoinMarketCap data. That drop marks the biggest monthly loss of the year so far.

Amid the losses, trading volumes jumped by 33 percent month-on-month to $158.48 billion – the highest level since May.

It is worth noting that, at the start of the month, BTC was already down close to 70 percent from the record high of almost $20,000 reached in December 2017. So, November’s losses essentially mark an extension of the bear market (which had supposedly bottomed out near $6,000) with a high-volume drop to 14-month lows below $3,500.

But BTC’s failure to produce a meaningful bounce despite the repeated defense of the 21-month EMA in five months to October might have left investors disappointed, resulting in the increased sell-off as they left the market. Amid these signs of capitulation, it is still too early to call a long-term bottom.

In the last few days, however, prices have recovered from lows below $3,500 – possibly just bargain hunting after the sell-off, but potentially the start of a corrective rally, as the 14-day relative strength index (RSI) was reporting record oversold conditions a few days ago.

Monthly chart

On the monthly chart, BTC is set to close below the former support (now resistance) of the 21-month EMA for the first time since October 2015.

A long-term bullish reversal would only be confirmed if and when prices clear the EMA, currently lined up at $5,977.

4-hour chart

On the 4-hour chart, BTC has fallen back below the double top neckline support at $4,120, having faced rejection at the falling trendline. As a result, the immediate bullish outlook has been neutralized.

The recent low of $3,474 could come into play if the immediate support at $3,771 (low of Wednesday's bullish reversal candle) is breached.

A break above the falling trendline, if confirmed, would bolster the already bullish technical setup and could yield a stronger rally toward $5,000.

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• The bitcoin market is likely showing signs of capitulation.
• A break below the neckline support of $4,120 has neutralized the immediate bullish outlook put forward by the double bottom breakout yesterday.
• A move below $3,771 (Wednesday's low) would invalidate the bullish setup on the daily chart and allow re-test of the recent low of $3,474.
• A break above $4,250 (falling trendline resistance) would open up upside towards $4,761 (resistance as per the 4-hour chart).

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin image via Shutterstock; price charts by Trading View