Bitcoin's recent drop from $10,500 to levels under $8,000 has erased a major portion of year-to-date gains. Currently, the cryptocurrency is up just 9 percent from where it started the year compared to over 45 percent seen four weeks ago.
That number could fall further on broad-based risk aversion in financial markets, courtesy of sustained coronavirus fears and prospects of an all-out oil price war.
Monetary easing by major central banks is not helping either. The U.S. Federal Reserve cut rates by 50 basis points last week and is widely expected to deliver another big rate cut next week. The Bank of England also cut rates by 50 basis points on Wednesday. Even so, the Dow Jones Industrial Average is currently reporting a 1,000 point drop. Oil prices are also down over 3 percent on the day.
The technical charts, too, suggest the path of least resistance is to the downside. Bitcoin remains in bearish territory below the head-and-shoulders neckline resistance, currently at $8,460. With three-day chart indicators signaling a strengthening of bearish momentum, the cryptocurrency risks breaching immediate support at $7,734. That will likely bring additional losses toward the support at $7,130 (200-week average).
However, if prices manage to close out Wednesday above $8,158, a temporary seller exhaustion signaled by Tuesday's inside bar candlestick pattern would be confirmed. That could yield a rise to $8,460. A bullish reversal would be confirmed if and when prices rise above $9,219 (March 7 high), invalidating the lower-highs setup.
Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.