Bitcoin crashes $2000 but finds strong support
The expected correction in bitcoin’s price has occurred, as bitcoin crashes $2,000 – but quickly recovers from $6,200 to $7,200.
Bitcoin’s recent parabolic rally was called into question yesterday, as the virtual currency broke the ascending trendline – apparently putting in a much-needed consolidation. However, after a battle to hold the $8,000 level, BTC finally crashed hard this morning, dropping as much as $1,800. Support was found at $6,178 (Bitstamp), and buyers then rushed in to pick up discounted coins – sending the price back up above $7,000. The result is a doji candle with a wick of over $1,000 long on the 30-minute chart. At the time of writing, bitcoin is trading between $7,200 and $7,300, which has confluence with an area of prior activity last Sunday.
This correction was very much expected; no market can sustain such parabolic growth without a pullback. However, what is pleasantly surprising is the strength of support in the $6k region. The whole $6,000–$6,800 area was one of intense activity during the 2018 bear market, and this zone might therefore be expected to act as strong support (as it did before). Bitcoin crashed into it and then immediately rose back out, proving that there are plenty of buyers who believe that anything sub–$7k is a bargain right now.
The rapid move down and back up would have cleared the order book in both directions, closing out both shorts and longs in the process (as can be seen from this chart of shorts on Bitfinex). It also pulled RSI down out of overbought territory on the higher timeframes; on the daily chart, RSI had been above 70 for most of the month, and on the 4h chart RSI is currently around 40 – approaching oversold.
Volatility is therefore to be expected in the short term, but bulls have given another sign of strength to the market.