Bitcoin has formed lower highs and lower lows to trend inside a descending channel on its short-term chart. Price just bounced off the channel resistance and could be setting its sights back on support from here.
Applying the Fibonacci extension tool on the latest correction shows that the 78.6% level lines up with the channel support around $9,225. Price is currently finding support at the 38.2% extension that coincides with the mid-channel area of interest.
The 100 SMA is below the 200 SMA to confirm that the path of least resistance is to the downside or that the selloff is more likely to gain traction. However, the gap between the indicators has narrowed significantly to suggest that a bullish crossover is looming.
RSI is heading down to show that sellers have the upper hand and could keep the downtrend going. Stochastic is also moving lower to confirm that bears have control and could stay on for a bit longer until oversold conditions are met.
The return in risk-taking appears to be dragging bitcoin south as traders liquidate some of their holdings to move back to stocks and commodities. Still, bitcoin could be drawing some support as the halving of mining rewards is coming up soon and investors could be keen to position ahead of a potential doubling of value.
For now, the lack of market concern over the increasing instances of coronavirus in countries outside of China suggests that the focus might already have shifted elsewhere. Barring any major reports that could change this type of sentiment, traders might keep dumping their alternative crypto holdings in favor of more traditional assets again.
On the other hand, worsening updates on the coronavirus situation could still draw attention back to bitcoin and other cryptocurrencies since these typically act as safe-havens in this kind of market environment.
Images courtesy of TradingView
