Bitcoin Analysis: 10-12% pullback likely, Volumes contradict Goldman’s view


Bitcoin [BTC] lost weight on Wednesday as prices fell from $3444. 71 to $3227. The upward sloping -DMA came to the rescue and ensured the virtual currency trimmed some losses to end the day around $3290 levels.  The currency seems to have regained the bid tone to trade around $3350 levels this Thursday morning in Europe. 

As per coinmarketcap.com, Bitcoin has dropped 07% in the last 24 hours. Ether and Ripple have dropped 3.45% and 5.10%, respectively. The newly created Bitcoin Cash [BCC] has tanked 10.57%. The market cap of the crypto currencies stands $121.68 billion and the BTC dominance rate is 45.6%. 

‘Real dollars are at work here’, says Goldman Sachs

“Whether or not you believe in the merit of investing in crypto currencies (you know who you are), the real dollars are at work here and warrant watching", says Goldman Sachs in a Q&A note published on crypto currencies.     

Essentially, the investment bank is asking investors/clients to believe in the rally, although volume chart tells us something else. 

Daily chart - Prices drop, Volumes surge

We have repeatedly taken note of the bearish price-volume divergence over the last few days. Now, I am even more convinced that the virtual currency could witness a major pull back, given the volumes surged/breached the downtrend line on the negative price action day. 

So what we have is a combination of low volume on positive days and high volume on a negative day. 

It indicates that, “the real dollars may not be at work” contrary to Goldman’s claim. Unless we don’t see strong volumes on the positive price action day, the scepticism will prevail. 

Resistance

  • $3444.71 [previous day’s high]
  • $3504 [100% Fib extension of the July low - July 21 high - July 26 low]
  • $3806.95 [100% Fib extension of the March low - June high - July low]

Support

  • $3272 [5-DMA]
  • $3234.18 [1-hour 100-MA]
  • $3113 [10-DMA]

View

  • The pull back from the high of 3483 to $3227 [yesterday’s low], coupled with a spike in the volume on the negative price action day as discussed above indicates the bull market has run out of steam. 
  • The upticks are likely to be met with fresh offers and a more pronounced pull back to $3100-$3000 looks likely in the short-term. 
  • On the higher side, only an end of the day close above $3504 would revive the bull market trend, although we would want to see a spike in the volumes as well. 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD accelerates decline and nears 1.1200

The US Nonfarm Payroll report’s effects are long gone. The greenback gets attention as stocks eased sharply from intraday highs, still holding in the green, yet undermined by record coronavirus cases in the US.

EUR/USD News

AUD/USD hovering around 0.6920 after a dull day

AUD/USD pair seesawed between gains and losses, settling for a second consecutive day at around 0.6920. Australian PMIs and Chinese services output coming up next.

AUD/USD News

Gold: Bears seeking justice below key support

XAU/USD has been a mixed bag this week and for the start of the month, trapping bears ina recent stop hunt from the $1,757.66 level where it met a high of $1,779.69 on the last session before the US long weekend. 

Gold News

Crypto collapse with Bitcoin falling below $9,000 and Ethereum getting close to $220

Most cryptocurrencies are experiencing a significant sell-off after Bitcoin fell below $9,000. BNB/USD has suffered the most with a 4% drop towards $15 and needs to hold $14.8 support. 

Read more

Oil: $40 per barrel has been broken again but there is a lack of conviction at these current levels

WTI has continued to move higher on Thursday but the price action seems pretty lacklustre despite volatility elsewhere. There have been some decent news stories in the past few sessions as it was confirmed OPEC output reached a two-decade low after over compliance from Saudi Arabia. 

Oil News

Forex Majors

Cryptocurrencies

Signatures