BTC/USD breaks key support opening the door to further losses

Market Commentary

The Bitcoin bears have certainly been taking advantage of their renewed strength over the past 24 hours considering the 5500 $ area that we spoke at length about recently was broken quite quickly and easily which led to another cascade lower into the 5300's $ where some very short-term support emerged. The bears then took a brief breather which allowed the bulls to push price up to 5600 $ where sellers returned for another leg to the downside, ultimately reaching a new cycle low of 5199 $ this morning. Now the bears are once again pausing to get some air so price has bounced back up into the 5500's $ where the action has turned consolidative over the near-term as the market digests the BCH hard fork/split that occurred earlier today.

4-Hour Chart

We'll focus on the 4-hour chart for now where we can see that the selloff over the past 24 hours has consisted of large bearish candle formations while market structure remains broken on all timeframes, both of which continue to favor the bears, however the current bounce off of the 5199 $ lows has sparked a new demand area that could keep price range bound in the 5000's $ over the course of the next few days. Having said that, all of the moving averages are picking up steam to the downside, multiple levels of dynamic resistance continue to build overhead, and the Ichimoku Cloud is still moving swiftly lower, so the bearish bias is certainly still intact meaning we don't think we've seen sustainable lows just yet despite what has so far been a rather nice countertrend move off of the lows.

Moving on to momentum and volume, its clear that the market got extended to the downside on a near-term basis considering RSI and the Stochastic are still in officially oversold territory and MACD had a massive washout from which it is just starting to bounce suggesting that the current selling respite likely has some legs. This outlook is being confirmed by the A/D line which has bounced quite nicely off of the lows, and the volume profile setup which is showing a large notch between 5700 - 6200 $, both of which should help the bulls moving forward, however exchange volumes are still firmly bearish hence any upward move we think will be countertrend in nature. Granted, a run-up to or above 6000 $ is possible (albeit not likely) at some point in the not too distant future given the still very oversold technicals, which would align with the 2014 fractal that many are now discussing, although we expect more selling to drive prices lower once again within a week regardless of what materializes near-term.

Bottom Line: We're staying neutral on BTC/USD until lower prices present a better long entry opportunity below 5000 $.