Is Bitcoin Falling into a Deeper Bear Trend?

Earlier in July, the circumstances for a bitcoin bull market emergence were ideal. On July 14th, at a price of around $6,100, bitcoin hit a critical fibonacci retracement level of .618. It then rebounded off of a triple bottom. With help from the ETF rumor the price elevated to a high of around $8,400. Unfortunately with the events which occurred last week this bull market theory has, for the most part, been falsified.

Now it appears that the recent rally seen in bitcoin is once again another failed rally. In trading and investing it is very unlikely to see an asset bounce off of a quadruple bottom into another bull rally. Usually the asset will continue to consolidate and then decline into a bear market for a significant amount of time before any potential recovery. This was true of gold throughout 2011-2016. It may be likely for bitcoin in its current state.

The drop that came on Saturday, 4th of August, was a major catalyst which drove bitcoin below critical support levels. Breaking below the support level of $6,800 was also a major indicator that the rally may have failed.

When the price of bitcoin broke below $6,800 it was the equivalent to a yellow stop light. It was a critical warning signal that the bull market hypothesis was now inaccurate. Furthermore, a drop below the critical support level of $6,000 would symbolize a red light and would ultimately indicate another failed rally. At bitcoin’s current state, it is unlikely that another bull run rekindles to break above $8,000 before breaking below $6,000. A potential break below the critical support level of $6,000 could add many additional months to the existing bear market.

Although many attribute the extreme fall in price to the ETF postponement announcement. The actual effect of the news may have been overhyped. The ETF decision did play a role in BTC’s decline, however it is important to remember that over the counter (OTC) trading accounts for at least 75% of all of bitcoin’s global trading volume. Also, there was no shortage of positive news last week as the announcement by the New York Stock Exchange, Starbucks, and Microsoft to establish a cryptocurrency exchange should have lead to a massive surge in price. Unfortunately, this was not the case.

It is also possible that many ICOs are in danger as the price of Ethereum got crushed last week. Many Ethereum-based ICOs are panic selling their ETH funds fearing a larger drop in the short-term. It is unfortunate that many ICOs are barely surviving through the bear market as Ran NeuNer’s tweet suggests,

In relation to last week’s decline, many think it is beneficial that bitcoin has the ability to be traded on weekends because the market never closes. In actuality, this is not true. Weekend volume is incredibly thin when it comes to crypto trading. This leaves the market vulnerable for drastic manipulation. In the short to medium term, the technicals are not looking good for bitcoin. It may be time to reevaluate the market with patience as to what the longterm possibilities for bitcoin could be.