Bitcoin may be witnessing a healthy pullback.
After having rallied more than 90 percent from a September low of $2,980, the bitcoin-US dollar (BTC/USD) exchange rate is trading at $5,240 today, a figure that, at press time, marks a new daily low. As per CoinMarketCap, the cryptocurrency has shed 7.37 percent in the last 24 hours. Week-on-week, BTC is up 9.9 percent, while month-on-month it is flashing 29 percent gains.
Still, with prices having jumped above $5,000 (the previous all-time high) on Oct. 12, what we are witnessing today might be best considered a healthy correction, courtesy of overbought technical indicators.
For example, demand for bitcoin jumped last week, reportedly on speculation that the hard fork in November may benefit buyers with the creation of new cryptocurrency (as in August when investors were allotted newly created bitcoin cash).
Dip demand during this period, if observed, would add credence to the record rally and indicate that the base in bitcoin has shifted higher to $5,000.
So, will the cryptocurrency hold above $5,000 mark?
The price action analysis suggests bitcoin needs to regain the bid tone quickly, else the odds of a break below $5,000 would rise.
Daily chart
As noted in the previous updates, a combination of an overbought relative strength index and stochastic indicators has yielded a technical correction.
In the previous four occasions (marked by red circles), bitcoin prices dropped well below the 10-day moving average. Currently, the 10-day moving average is seen at $5,354 levels. As of now, prices are trading below the 10-day moving average and may extend losses to $5,000 levels.
So long as prices remain above the $5,000 mark, the broader outlook remains constructive. Multiple day-end closes below the psychological level would be a cause of concern for the BTC bulls.
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