Bitcoin, try as it might, is having immense difficulty maintaining a price above $8,000.
This week any move above that level has found sellers coming to the fore.
Indeed, bitcoin has been stuck in a wide trading range since the end of May, which Simon Peters, cryptocurrency analyst, sees as indicative of the overshooting price advance witnessed in the past few weeks.
Bitcoin sees strong support at $7,500
“Bitcoin is trading in a wide range from $7,500 to $9,000 following last week’s double-digit price drop. Since hitting a top in May, its price moved downwards, testing $7,500 as a support – this level is still holding strong at the moment, but the bitcoin bulls will need to make their presence felt over the coming days to defend this threshold.”
The “Bart Simpson” trading pattern is readily apparent on the chart, with at least three discernible formations since late May.
Weakening bullish momentum suggests that buyers are reluctant to take positions that they see holding little support, with those suspicions strengthened with each new rebuff of price quotes above $8,000.
However, that lack of support could see prices give up the gains made since the beginning of May, with bitcoin returning to the mid-$6,000s.
“Given the extraordinary run we’ve seen recently, I wouldn’t be surprised if we see prices fall through this level, to around $6,500 – $7,000, as over-extended prices tend to find a way back to their averages,” says Peters.
Bitcoin investors to buy the dips?
He also thinks there’s a possibility that buyers are holding their fire, as they look to buy the dips.
“Given the extraordinary run we’ve seen recently, I wouldn’t be surprised if we see prices fall through this level, to around $6,500 – $7,000, as over-extended prices tend to find a way back to their averages.”
There may of course be an overshoot to the downside in that event, with weaker hands panicking and/or traders deciding to lock in profits above $6,500.
However, bitcoin has found strong support at around $7,500.
Other analysts have pointed to the 30-day moving average as the most significant support level, which is at $7,643, so price watchers may want to set an alert at that position. Those who bought above $8,000 may want to make that a stop-loss as it could signal a deeper pull back as previously explained.
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Gary is the cryptocurrency analyst at UK investment platform interactive investor and writes here in a personal capacity. None of his comments should be taken as investment advice.