The bitcoin price (BTC) has dropped from $10,050 to $8,000 in the past week by nearly $2,000 against the US dollar, leading traders to anticipate a larger pullback to lower support levels.
According to traders and technical analysts like Josh Rager, the bitcoin price could drop to as low as $6,300 in the short term if the pullback intensifies to a region where large buy demand exists.
“Have been asked how far can BTC drop IMO, the lowest BTC will hit: between $6300 to $6600 where there is major interest Price currently bounced off monthly support & if this area breaks could head to $6600 – based on higher time frames.”
While calls for a retest of even lower support levels in the $3,000 to $4,000 have emerged as BTC dropped to $7,700 over the weekend, a 70 percent correction from the yearly high is highly unlikely to happen, especially given the abundance of buy orders in the $6,000 to $7,000 range.
What could boost sentiment around bitcoin price to avoid bigger drop?
As said by DonAlt, a cryptocurrency technical analyst, the bitcoin price has been showing a continuous decline in momentum and build-up of sell pressure as it failed to recover from the $8,000 region.
Last week, the analyst said that a swift recovery to the $10,000 level would result in an immediate trend reversal for BTC, flagging the drop to $7,700 as a bear trap.
However, the dominant cryptocurrency has not been able to demonstrate signs of proper recovery, struggling to rebound above key resistance levels.
At this juncture of the short term trend of BTC wherein bears are seemingly trying to gain control over the market and no upside movements are being initiated, market or industry developments like the emergence of new trading venues or products are not likely to affect the bitcoin price in a major way.
The Bakkt launch, which has been described as an important catalyst for BTC throughout 2019, had no visible effect on BTC since its debut. The Bakkt futures market has seen little volume throughout the past several days, which was expected as it would require time for brokers to set up systems to pass trades through Bakkt.
The only set of catalysts that could boost the sentiment around BTC in the near term remain technicals; if BTC starts to show extreme oversold conditions and buyers step in as BTC approaches lower supports, the price may turn around, relieving some of the pressure on the market.
Alternative cryptocurrencies like Ethereum, EOS, and XRP have shown even weaker short term movements when compared to BTC, which suggests that investors are not trying to take high-risk high-return trades during periods of uncertainty.
When would BTC show oversold conditions?
On larger time frames, BTC is likely to start showing oversold conditions as it drops to the mid-$7,000 region, which is also of interest in terms of historical price action and supports.
One variable in the cryptocurrency market remains the low volume of major cryptocurrencies. According to Messari, the real volume of BTC is estimated to be $267 million, lower than the volume of Tether.
Considering that BTC has seen a steep sell-off in the past several days, a fight from the bulls to protect certain supports should have allowed the daily volume to remain stable in the $500 million to $600 million, which indicates that this level may not be attracting buyers yet.
Click here for a real-time bitcoin price chart.