Why Did Bitcoin Break Down From $9,000, and Where Is It Heading?
As Bitcoin’s (BTC) price floats in the waters of uncertainty in the low $8,000 range, one might wonder how crypto’s largest asset found itself at the bottom of a steep drop after its exuberant price rise from $3,330 to $13,880 earlier in 2019. One explanation could be that the move was simply the market’s reaction to a chart pattern many experts had their eyes on for months.
After its June 26 price high at $13,880, Bitcoin formed a descending triangle, followed by multiple months of consolidation. Near the end of the pattern the digital asset plunged from $9,700 to $8,000, a $1,700 drop in a single day. Bitcoin’s Sept. 24 tumble also occurred just one day after Bakkt launched its physically-settled Bitcoin futures product.
Following the sharp correction, prominent crypto analysts Ledger Status, Tone Vays and Crypto Cred, provided insights on Bitcoin’s wild price drop.
Weekly Crypto Market Performance. Source: Coin360.com
Ledger Status explains the market was due for action
According to crypto analyst and podcaster Brian Krogsgard, also known as Ledger Status on Twitter, Bitcoin was due for some activity. “The market needed a reason to move after three months of tight consolidation,” Krogsgard told CoinTelegraph.
During its breakdown, Bitcoin punched through an important moving average (MA), possibly accelerating the drop. “The breakdown was a break under the 20-week moving average, which in prior bear and bull markets has been a significant support and resistance line,” Krogsgard explained.
BTC/USD Daily Chart. Source: TradingView
Tone Vays expressed hesitancy from the start
According to popular analyst Tone Vays, the rationale for Bitcoin’s bloody day actually started with its exuberant price run months earlier. “This entire run-up didn’t seem right to me,” Vays said in a Sept. 24 YouTube video.
Vays mentioned other crypto traders have pointed to alternative metrics to justify Bitcoin’s parabolic move, such as the high volume seen on the asset’s blockchain. Vays himself, however, simply sticks to price action. “I’m a price guy,” he said. “Price is king, and the price did not make sense,” he added.
Vays also pointed out that no fresh money has entered the market in the form of new participants. In contrast, when Bitcoin rocketed up to its all-time high close to $20,000 in 2017, the cryptocurrency space saw a flood of new entrants to the market as the asset gained significant public attention.
“In the last six months, I have not met anyone that has started watching me in 2019,” Vays said referring to his crypto-oriented social media content. “Every single person I met started watching me in 2017,” Vays said, adding that he also picked up a small number of viewers near the beginning of 2018.
BTC/USD Daily Chart. Source: Tone Vays
Crypto Cred sees a lack of strength in the market
Crypto Cred, a well-known educator and trader on Twitter, posted an educational technical analysis YouTube video on Sept. 24 referencing the breakdown. Periods of consolidation generally follow strong surges in price, Cred explained in the video. After such consolidation, the price typically continues its journey in the same direction as the initial price move.
In Bitcoin’s case, the price should have continued higher after its consolidation, according to Cred’s teaching. As the market saw, however, Bitcoin’s price did not continue upward but instead broke out to the downside. This move in price could indicate a lack of market strength, according to Cred, based on the fundamental aspects taught in his video and his comments on the Sept. 24 drop.
Cred looked at Bitcoin’s consolidation as a range instead of a triangle, pointing toward horizontal support and resistance levels. “Support breaking is bearish; it’s not good,” the analyst said of Bitcoin’s move down.
Cred also pointed to Bitcoin’s Sept. 24 daily candle, noting that a close below the previous candle lows from the consolidation would paint a lower low on the chart, indicating a change in the trend. Additionally, the educator mentioned the pattern’s lower limit lined up in confluence with other horizontal levels and the higher lows seen before the dump.
The Sept. 24 candle did indeed close as a fresh low relative to the other lows mentioned.
BTC USD Daily Chart. Source: TradingView
Where to next?
Bitcoin sits in the lower $8,000 range as it sets up for its next move, which Krogsgard noted possibly could be down to $5,000 or $6,000. Such a drop would signal the end of a complete measured move for Bitcoin, although, buyers have shown up to defend lower prices so far. “The 200-day moving average support at $8,400 and a high volume node at $7,900 offered a buffer where bulls must show up and/or reclaim, and thus far have done so to some degree,” he explained.
As Bitcoin’s price sits in limbo between lower prices and renewed upward momentum, the bulls need to regain a few key levels. “If $8,400 can be reclaimed, I think we could see a quick move up to retest the breakdown around $9,400,” Krogsgard said. “If we then push above the consolidation breakdown, there is a strong chance for a renewed expansion to retest highs.”
Unfortunately for the bulls, the 200-day moving average could now be viewed as an opponent that needs to be defeated and turned into support once again. “A more likely scenario is that the 200-day moving average acts as resistance now, and we consolidate for another couple of weeks, which would likely be a continuation pattern most likely to break to the downside and move us to the low $6,000s,” Krogsgard said.
Even if Bitcoin follows this route down to $5,000 or $6,000 the trend can still technically be seen as bullish. “I maintain a long term bullish bias unless we lose the 200-week moving average (currently around $4,600 and moving upward), which has marked the bottom of the last two bear markets,” Krogsgard said. The analyst also noted that prices under $6,000 might represent a notable opportunity to pick up more Bitcoin.
In the meantime, price action likely demands a watchful eye and continual evaluation. “Everything between $6,000 and $8,400 requires active mid-timeframe trade management,” Krogsgard said. If Bitcoin’s price can rally back above the 200-day and 20-week moving averages, it would be quite bullish for the market, he added.
The views and opinions expressed here are solely those of (@benjaminpirus) and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.