Bitcoin price ended its consolidation phase by closing below $18,300 but will traders buy the dip?
After spending the last few days trading in a tightening range, Bitcoin (BTC) price dropped from its pennant structure and closed below the 20-day moving average ($18,600).
Since topping out at $19,888 a number of analysts cautioned that Bitcoin price was at risk of a strong pullback if it failed to either secure a daily close above $19,500 or at least hold $19,000 as support.
During Bitcoin’s most recent bull phases the price has held above the 20-MA so a daily close below this metric could be a signal that a short-term trend change is in order. In this instance, it also appears that bulls are yet to purchase the current dip.
As the price dropped and the daily close approached crypto analyst Alex Saunders said, “Unless $18,700 holds, the descending triangle likely takes us lower short term.”
On the other hand, Cointelegraph analyst Micheal van de Poppe tweeted that despite the drop Bitcoin price is:
“Still in the range, but the more often support gets tested, the weaker it becomes. Volatility will likely occur between $18,500 and $19,500.”
Van de Poppe further explained that the “BTC price level below $20,000 has been accompanied by diminishing volatility and volume, making it increasingly difficult to predict the direction of the next move.”
Now that BTC appears to be trading in a descending triangle, traders will watch $18,013 to see if the price can form a double bottom at the triangle support. Below this level, the volume profile visible range and market structure suggest that there is also support at $17,800.
The RSI on the 4-hour timeframe is also entering oversold territory, meaning an oversold bounce could occur, but this move will require significant buy volume to push the price back to the 20-MA where there is likely to be resistance.
A bullish turn of events would involve BTC making the double bottom mentioned above, then flipping the 20-MA and $19,000 level back to support for at least a 4-hour close.
On the other hand, if $17,800 fails to hold as support, Bitcoin price could drop to $17,200 then $16,400 which is near the 23.6% Fibonacci retracement.
In a previously published analysis, Micheal van de Poppe also pinpointed a large CME gap from $18,275 to $16,995.
According to van de Poppe:
“Generally, 95% of the CME gaps get filled, which raises the probability of price dropping back to these levels in the short term.”
This suggests that failure to hold the aforementioned levels as support heightens the chance that Bitcoin price snatches the liquidity below and re-visits the $17,000 level.