Bitcoin’s (BTC) recent downtrend has deepened in the wake of the Securities and Exchange Commission’s (SECs) decision to delay the exchange-traded-fund (ETF) ruling.
The leading cryptocurrency was expected to stage a minor corrective rally in the last 24 hours, having defended the key 50-day moving average (MA) support earlier this week.
However, the sellers made a strong comeback above $7,100 after the SEC exercised its right to postpone the decision on whether to approve a rule that would allow Chicago Board Options Exchange (CBOE) to offer shares of a BTC ETF issued by VanExk SolidX Bitcoin Trust.
As a result, BTC closed (as per UTC) yesterday on a negative note at $6,719 and fell to $6,360 today – the lowest level since July 16. At press time, BTC is trading at $6,500 on Bitfinex.
The 7.9 percent sell-off witnessed in the last 24 hours only reinforces the view that a major part of the rally seen in July was likely fueled by speculation that a Bitcoin ETF could be approved by the US SEC within weeks.
Further, the bear grip around bitcoin has strengthened in the last 24 hours as the drop to three-week lows below $6,400 essentially means the cryptocurrency has retraced more than 70 percent of the rally from the June 24 low of $5,755 to July 25 high of $8,507.
Still, all is not lost as the SEC has merely delayed the decision on BTC ETF to September, meaning there is still a 50 percent chance that an ETF would be approved next month.
However, the hope that September may bring a decision in favor of an ETF may not yield a renaissance in the BTC market as investors could adopt a more cautious stance this time. Further, the technical charts are biased toward the bears.
BTC’s break below the ascending trendline (drawn from the June 29 low and the July 12 low) has bolstered the already bearish technical setup: the 5-day and 10-day MAs are sloping downwards in favor of the bears.
BTC is trading well below the long-term MAs (50-day, 100-day, and 200-day), which indicates the path of least resistance is to the downside.
More importantly, the relative strength index (RSI) is holding below 50.00 (in bearish territory) but is yet to hit oversold territory (below 30.00). So, there is scope for a further drop towards $6,000, albeit after a minor bout of consolidation as the short-duration technical charts are reporting oversold conditions.
The RSI has dropped below 30.00, signaling the sell-off is overdone. As a result, BTC could trade in a sideways manner in a falling channel in the next day or two.
- BTC’s drop to three-week lows below $6,400 has likely strengthened the bear grip and opened the doors to $6,000 (psychological support).
- The cryptocurrency might consolidate around $6,500 in the next 24 hours, as suggested by the 4-hour chart, before resuming the sell-off.
- Only a high volume break above the falling channel seen in the 4-hour chart would shift risk in favor of a re-test of $7,200 (200-candle MA on the 4-hour chart).
Disclosure: The author holds no cryptocurrency assets at the time of writing.