Bitcoin’s $1,000 Correction
Bitcoin price action has been choppy, with a breakout to $9k before a significant retracement yesterday evening.
With bulls proving strong over the past two months and bitcoin consolidating after its rise to within a few dollars of $9k earlier this week ($8,929, Bitstamp), it seemed like only a matter of time before BTC put in another leg higher and broke the next round number target.
However, no sooner than it had happened than sellers too over, driving the price down by over $1,000 in a matter of hours. Bitcoin bottomed at $8,000 dead, before staging a moderate bounce. At the time of writing, it appears to be consolidating around the $8,200 level, though it is not clear whether the downward move will have more momentum.
Disclaimer: this is not investment or trading advice. Bitcoin Bulletin will never tell you what to do with your money.
The fall brings bitcoin back to the level it breached on 13 May. In the intervening period, it has fallen as low as $6,178 in a flash crash brought about by suspicious trading activity on Bitstamp. On that occasion, bitcoin fell $2,000 in the course of a single day, including a $1,000 drop over just a few minutes. However, bulls proved resilient and the episode established that there was excellent demand in the $6k zone.
While $1,000 is a significant amount – a correction of around 11% – it does not threaten the uptrend. Pullbacks, even ones this deep, are to be expected in any rally that lasts more than a few weeks. They are a sign of a healthy bull market, rather than one that is unsustainable. This particular pullback could run a lot further before there was cause for concern. $6k would not be worrying, especially if bitcoin once again bounced off this level.
At the present time, we may see further falls but bitcoin is badly oversold on the shorter-term timeframes, with RSI having dipped below 30 on the 1h chart and approaching 30 on the 4h. On the higher timeframes, the correction has done no more than bring the RSI out of overbought. On the weekly, it is still above 70.