Many are comparing the action in bitcoin to the action in gold. Often touted as the next safe-haven, bitcoin is now bearing the brunt of the ‘Bremain’ – a fancy term for Britain staying in the European Union. Bitcoin, resultantly, is losing its sheen.
We believe that instead of the outcome of the EU referendum, bitcoin is being brought down by speculators with deep pockets.
In our previous update on bitcoin titled, Bitcoin Collapses On Selling Frenzy, we advised market participants to book their losses or capture their gains. The market has proved us right as the sell-off has expectedly intensified and the price has collapsed another 13 percent to the current level of $576. The digital currency has touched an intraday low of $544.13, piercing the earlier consolidation level in a flash.
While we believe that not all is lost for the cryptocurrency, we cannot rule out more pain. From the daily BTC-USD price chart taken from Coinbase, it can be seen that the cryptocurrency had been registering higher lows for months now with the help of an upward sloping support line. Strong support as per this trendline comes at around $470.
We also see some buying coming in around the psychological level of $500.
Is Bitcoin Oversold?
Many market participants believe that due to the precipitous fall from $785, the cryptocurrency has entered the oversold territory, however, the technical indicators say a different story.
The 14-day Money Flow Index reading of 46.9231 is still far from the oversold level of 20.
The 14-day Relative Strength Index has a current reading of 42.6419, which is quite distant from the oversold boundary of 30.
Bitcoin may fall or consolidate at the current level. Market participants are advised to adopt a wait-and-watch approach at this juncture, but they must go long if the price plummets to near $500 with a stop-loss placed just below the upward sloping support.