The bitcoin price on Friday plunged 0.85 percent against the US dollar, now trading at 5528-fiat.
The digital currency has had a shocking week so far, with its value losing almost $1,200 within just five days. Not only bitcoin, but the entire cryptocurrency market also had to “bear” losses worth billions of dollars as a civil crypto war brewed inside the Bitcoin Cash community. It has already led to the split of Bitcoin Cash blockchain. Now, the market expects a return to normalcy.
Bitcoin initially traded shakily, owing to the displeasure of investors who preferred to stay out of its trades until the dust settled. The price started rebounding on Thursday after the BCH fork went live, rising from a low at 5188-fiat to as high as 5611-fiat. That marks more than 8 percent in intraday gains.
Bitcoin expects to further its gains amidst favorable macroeconomic factors. A Federal Reserve official today expressed doubts about the outlook of an interest rate hike scheduled at the end of this year. The comments rattled a strong US dollar, which dropped to its weekly low.
The technicalities do not support a robust bullish correction, anyway. The BTC/USD pair is trading in the middle of nowhere, with no bottom established yet. The next crucial support area is near 3027-fiat from September 2017 while a psychological barrier sits somewhere near 4500-fiat. The pair then again remains capped by strong resistance levels as it pursues a more substantial bullish correction.
On the daily chart, the BTC/USD RSI indicator is inside an oversold region, awaiting correction from bulls. The Stochastic Oscillator is also inside a buying sentiment area following the latest drop. At least in near-term, we are looking at a bullish bias.
While trading inside a falling wedge formation, BTC/USD can expect to restest the lower trendline for a potential bounce back towards the upper trendline. This action would be too obvious, which is why we have placed a Fibonacci retracement level to understand potential entry/exit levels — as defined in the intraday analysis as follows.
We are looking at a range that is defined by 5414-fiat as interim support and 5709-fiat as interim resistance. BTC/USD has stabilized near-term following the latest correction, allowing us to expect a further bullish action. That said, we have already entered a long position towards 5709-fiat while maintaining our stop-loss order just three-pips below the level we entered from. That should minimize our losses if the downtrend resumes.
If BTC/USD manages to break above 5709-fiat, we will enter a new long position towards the 50 percent Fibonacci level at 5871-fiat. A stop loss just three-pips below the entry position would protect us from heavy losses should the uptrend reverse.
Looking to the downside, a break below 5414-support would have us enter a short position towards 5354-fiat while eyeing 5188-fiat as a potential breakdown target. On both the short positions, we will maintain a stop loss 5-pips above the entry position to define our risk management against the bulls.
Featured Image from Shutterstock. Charts from TradingView.