Bitcoin technical analysis: Examining BTC/USD’s plunge below $7,000

• BTC/USD has fallen below the $7,000 mark, which was a key psychological level.
• The four-hour BTC/USD market is trending in a downward channel formation.
• Chainalysis released a report stating that a massive Ponzi scam triggered the drop below the $7,000-level.
• Possible resolution of the US-China trade war and Brexit has been detrimental to safe-haven assets like Bitcoin.

BTC/USD daily chart

BTC/USD has had a heavily bearish Monday, wherein its price fell from $7,114.35 to $6,887 and has since dropped further to $6,862. The price is floating below the 200-day Simple Moving Average (SMA 200), SMA 50 and SMA 20 curves. The bulls will need to defend at $6,740. The Moving Average Convergence/Divergence (MACD) indicates increasing bearish momentum. 

BTC/USD four-hour chart

The four-hour BTC/USD market is trending in a downward channel formation and floating below the red Ichimoku cloud. The price is floating below the SMA 20, SMA 50 and SMA 200 curves. The Elliott Oscillator shows eight straight red sessions of increasing intensity.

BTC/USD hourly chart

The hourly BTC/USD price is trending horizontally and has re-entered the 20-day Bollinger Band. The price had earlier bounced up from the $6,852 support line. The Relative Strength Index (RSI) indicator has been trending at the edge of the oversold zone for a long time.

Key Levels

Did a Ponzi Scam tank Bitcoin’s price?

Chainalysis, a blockchain tracking firm, released a report stating that the drop in Bitcoin’s price below the $7,000-level was triggered via PlusToken - a massive Ponzi scam. PlusToken is an online wallet project aimed at Chinese-speaking audiences.

As per Chainalysis, they were able to track “a total of 180,000 BTC, 6,400,000 ETH, 111,000 USDT, and 53 OMG (OmiseGo) that went from scam victims to PlusToken wallets, equating to roughly $2 billion.” 

Following that, they used a variety of techniques to “[obfuscate] the movement of funds,” and transfer the bulk of their gains to wallets owned by OTC brokers on Huobi’s platform. As per Chainalysis’s investigation, $185 million worth of the Bitcoins were cashed out using these OTC brokers, which may have dropped the price. Having said that, the firm admitted that “it’s not possible to distinguish between trades made by OTC brokers in possession of PlusToken funds and all other trades made on Huobi, we can’t say for sure that PlusToken cashouts caused Bitcoin’s price to drop.”
 
Huge sell-offs have been historically responsible for the massive drops. Back on September 20, some scammers cashed out $34 million worth of Bitcoin, dropping the price from $10,000 to $8,000. 

Does a clearer political atmosphere stop capital inflow into Bitcoin?

The US-China trade war and the uncertainty behind Brexit have been highly profitable for supposed “safe-haven assets” like gold and Bitcoin. Earlier this year, BTC/USD had gone up by 200% due to the uncertainties around these two political incidents. However, a clearer political picture has reduced the number of institutional investors entering the Bitcoin market, while lifting more traditional assets like stocks.

The expected sign off of a phase one deal between the US and China led US stocks to surge before the week close, buoying S&P 500 and Nasdaq Composite to fresh highs. On the other hand, Boris Johnson’s resounding victory caused the pan-continental Stoxx 600 to hit an all-time high.

Analysts share their view on Bitcoin’s performance

Tim Enneking, managing director of Digital Capital Management:

It’s quite clear that BTC has not put in a bottom yet. The price has been in a descending corridor since the crazy 42% increase in late October. The prior low, around $6.6k, is almost certainly not going to hold (i.e., no double bottom) as the market is very weak in terms of recovery from that level and volume….the highest likely bottom will be much closer to $6k or just below. A dramatic spike down and recovery (à la ETH in December of last year) would be a clear indicator of a bottom, but we simply haven’t seen anything close to that yet.

John Todaro, director of digital currency research for TradeBlock, on Bitcoin being oversold or not:

Looking at RSI metrics, I would not say we triggered an oversold situation

Joe DiPasquale, CEO of cryptocurrency hedge fund manager BitBull Capital:

Bitcoin is currently approaching the oversold threshold. At the moment it is being held up by a very weak support, around $6,800, which was briefly tested the last time on May 12 and 13, 2019. Downward pressure continues to mount as both, the 150-day and 50-day moving averages have declined, from $9,500 and $8,360, on December 1, to $9,125 and $8,069 today.

Willy Woo, Popular Bitcoin analyst, on why Bitcoin’s bearish movement will disappoint trader’s post halving:

NEVER gone into a halvening in BEARISH price action, miners already capitulating adding sell volume. Historically we front run with a BULLISH setup, miner capitulating only after halvening when revenues are slashed. This is a unique setup. Quite bearish leading up to the event.

Alistair Milne, a prominent Bitcoin investor, on pe-halving accumulation:

Things I expect to happen over the next 4-5 months due to the impending Bitcoin halving: – BTC shorts close out – People re-accumulate BTC if they had sold – Miners start to hoard (e.g. borrow USD against assets) – Under performing altcoins sold for BTC – Bulls lever up.