Bitcoin prices were devastated in early Friday trading. Without an obvious catalyst, prices were down around 8% and heading lower in the morning trade in the United States.
Prices had been stable most of the week in the upper $6000’s, and bitcoin bulls enjoyed a mini three day rally during the week. Before the steep decline early Friday morning, bitcoin had moved from about $6400 to a little beyond $6800 into Thursday evening during the course of this weeks trading.
The last time bitcoin was at this level (sub- $6200), was June 13th. The price quickly bounced and in a little over a day returned to over $6700.
chart built by Jason Pfaff in TradingView
Our view is bitcoin has been remarkably resilient when support has been tested in the low $6,000’s. With no major catalyst for this move, and with some fundamental factors stabilizing, we see a case where this could be another test of this level, and buyers could return to place a bid and buy on the dip.
The hard level to watch for bitcoin traders is $6,000. Any close or sustained move with follow through below $6,000 could spell the end for any bullish potential in the short term.
On the high side, $6,800 has proved to be a similarily difficult level to penetrate. It has been ten days since we have seen any meaningful action above that level.
Looking ahead, we see elevated probabilities for a bounce with heavier volume coming in at a very oversold level on the RSI.
If we see that a level generally around $6150 proves to be the low, we expect to reach $6500 in the next 24 hours and to resme trading in the upper $6800’s as we open next week. We would need to see an increased level of volume sustain for that to unfold.
If trading were to remain light for bitcoin, we may not seee the necessary momentum to make a 3%-6% move higher in the very near term.
Traders should continue to monitor volume and price action. Any move below $6,000 accompanied by a dip in volume would be very bearish for bitcoin.
Our bias is an expectation for buyers to once again return to the scene at this level and add momentum to bitcoin through Friday afternoon and into the weekend. Over the longer term, our base case is a level of $11,300 by the end of the year, which would correlate with a return to $8,000 in the next few weeks.