Bitcoin Price Decline Pauses Before Drop

July 23, 2016

Bitcoin price decline takes a break. The market is struggling to buy price higher in a correction, thereby, heralding the next wave of decline.

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Bitcoin Price Analysis

Time of analysis: 14h00 UTC

Bitstamp 1-Hour Candle Chart

From the analysis pages of, earlier today:

Bitcoin price declined, as expected, on an confirmation signal, yesterday. Overnight, a correction pushed back to the upside in the chart. A clear instance of RSI divergence accompanied the reversal as shown by magenta lines at the price lower low and in the corresponding RSI higher low.

Given the fact that the 4-hour chart is bearish, with its MACD below both zero and its signal line, and that the 1-day chart is about to enter a similar MACD alignment, we have to ask: What’s next?

The definitive answer, based on bearish charts at 15min, 1hr and 4hr timeframes, is: additional decline.

Notice in the 1hr chart (above), how the stochastics (top, magenta circle) are returning to their maximum, while RSI is about to reverse diverge to its previous high. This implies that once price has risen sufficiently to see the stochastics max out, RSI will be severely reverse diverged (blue annotations) and we’ll see a technically induced sell-off.

The next question of interest to traders is: What is the expected decline distance?

There are two scenarios for distance:

1) a large decline to $600 or $560, as per the overlapping Fib extension targets and support and resistance at these levels, or

2) a final subwave of decline to the consolidation pivot level at $640 (Bitstamp) from where price should reverse strongly into a new rally.

The second scenario is based on the tendency of the bitcoin price chart to become technically bearish just prior to a bounce to the upside. This scenario will manifest itself by a sharp drop that is retraced within hours by clearly advancing price candles. RSI divergence at the low should soon be followed with a buy signal in MACD on this outcome.


Bitcoin price is correcting prior to a wave of decline. The sell-off may be severe and see a return to $600 (or $560 at the previous decline low), or it may be short and sharp – to $640 in the Bitstamp chart. The first scenario is perhaps preferable – that the market sells price to obvious support and then builds the next advance from a strong foundation. When markets delay meaningful correction, it usually results in drawn out periods of uncertain and choppy consolidation. Let’s see which outcome the market chooses.

Bitfinex Depth Chart and Buy/Sell Volume

Click here for the CCN.LA interactive bitcoin-price chart.

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The writer trades Bitcoin. Trade and Investment is risky. CCN.LA accepts no liability for losses incurred as a result of anything written in this Bitcoin price analysis report.

Bitcoin price charts from TradingView.
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Venzen Khaosan @venzen

Market analyst and Open source developer with a keen interest in blockchain technology, consensus mechanisms and the decentralizing effect. He has found a solution to the PKI mechanism. Email me to discuss.