$6K Ahead? Bitcoin Plunges After Brief Recovery

For bitcoin, the path of least resistance is to the downside.

At press time, the leading cryptocurrency is trading at $6,340 on Bifinex – down 3 percent from the high of $6,550 hit earlier today.

The minor recovery from the previous day's low of $6,300 was likely a product of oversold conditions reported by the short duration relative strength index (RSI) yesterday.

More importantly, the fact that the gains have been erased quickly indicates the bearish sentiment is quite strong and the minor pop has likely recharged engines for further sell-off.

The technical charts are also biased toward the bears. As a result, a drop to $6,000 (February low) cannot be ruled out.

As seen in the above chart, the last hourly candle confirmed a downside break of the rising wedge-like pattern, signaling an end of the technical recovery.

The major moving averages (MAs) – 50-hour, 100-hour, and 200-hour – are trending south in favor of the bears. More importantly, the RSI is now aligned in a more bear-friendly manner.

BTC suffered a rising wedge breakdown on Wednesday, indicating the rally from the Aug. 14 low of $5,859 has ended and the bears have regained control.

Further, the negative price action yesterday bolstered the bearish setup. Meanwhile, the RSI at 40 is signaling room for a deeper drop in prices.

Investors should also keep an eye on the line chart as the pennant breakdown would boost the odds of BTC ending the week below $6,000.

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin chart image via Shutterstock; Charts by Trading View

Join 10,000+ traders who come to us to be their eyes on the charts and sign up for Markets Daily, sent Monday-Friday. By signing up, you agree to our terms & conditions and privacy policy

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.