The price of Bitcoin (BTC) has declined by more than 6% in the last three days and with the $276 million CME Bitcoin futures expiry approaching on Aug. 28, traders are nervous that additional downside could be in store.
Following Bitcoin’s rejection at $12,500, traders foresee two key scenarios playing out over the short term.
Some technical analysts believe that Bitcoin is headed to either $16,000 or $9,600 first but the near-term outcome remains uncertain as it’s dependent on certain resistance and support levels being hit.
Traders expect either $16K or $9.6K BTC
According to the pseudonymous trader Byzantine General, Bitcoin (BTC) could rise to either $16,000 or drop to $9,600.
If BTC’s weekly chart closes above $11,500, the trader said the chances of BTC rallying to $16,000 increase. If the price remains below $10,500, the trader said $9,600 is the logical support. He wrote:
“Let's keep it simple. 11500 key level. If weekly close above --> 16k. If close below --> 10.5 ‘obvious support.’ Cuz obvious 10.5 might do nothing like 6k in '19. 9600 is the next strong support (CME).”
XBT/USD 1-week chart. Source: TradingView
Another compelling reason traders might expect a brief pullback to the $9,600 to $9,700 area is due to a CME gap. These gaps form on the CME Bitcoin futures market’s chart because the regulated market closes during the weekend.
A CME gap typically is closed within a short period of time, and this raises the chances of a pullback. There is also a small CME gap at $16,000, but only on a lower time frame chart where the gap has existed for years.
In the short term, another cryptocurrency analyst called Mayne said that Bitcoin bulls would need to reclaim $11,700. Failure to reclaim this higher resistance level could result in an extended consolidation phase. The analyst noted:
“Here is what you don't want to see as a bull, price with a false break high and now stair stepping down. Last 2 up moves seem like clear bearish retests. If this is distribution, expect the selling to pick up speed soon. Bulls need to come in and regain $11.7.”
Sell the news action amplified the drop
Earlier today the price of Bitcoin briefly rose to as high as $11,600 following the Federal Reserve chair Jerome Powell’s speech on inflation. During the build-up to the speech many investors expected gold and Bitcoin to benefit from Powell’s speech about controlling the inflation rate.
But shortly after the speech finished the BTC price immediately declined from $11,600, dropping to as low as $11,125 on Coinbase. As Cointelegraph reported, it could have been the confluence of the market pricing in the Jackson Hole symposium and the lower-than-expected inflation rate.
The sell-the-news drop in the Bitcoin and gold markets further intensified the downtrend, causing Bitcoin to retrace to early August levels.
The sharp drop in BTC price over the past three days also broke the short-term bullish market structure, canceling out the higher low and higher high patterns.
Whether the altering of this trend will sway BTC into the bearish scenario of a revisit to the $9,600 to $10,500 price range remains to be seen.