After the big upsurge in April and May, Bitcoin has started the month of June on the backfoot. Clearly, after such a vicious rally, there must be some long-side speculators banking profit, while nimble short sellers may have also been dipping in their toes here and there in order to take advantage of the severely overbought conditions. But as always, the key question is this: where is Bitcoin headed?
That is a million-dollar question that no one can answer with a strong degree of confidence, and in any case it all depends on your time frame. You could say, for example, that it will be going lower and it may well go on to drop by, say, $2K but only after another $1K rally first. Would you still be correct?
For what it’s worth, I don’t have any strong views as far as the longer term outlook is concerned, but what does worry me about Bitcoin is this: while it has the first-mover advantage and will be here for a very long time, it can easily be replaced by an alternative crypto in the future – perhaps by one which may have major technological advantages and uses over this old digital coin.
But as short-term focused traders, we only worry about now and next and less so about the past and the distant future. With that in mind, Bitcoin’s current technical configuration points to further short-term weakness.
That’s because Bitcoin has failed to hold its breakout from the prior triangle pattern and support in the $8000-$8160 region. This area may now turn into resistance, leading to further weakness in the short-term, perhaps towards $7000 and possibly more. The fact that BTC/USD has also broken its 21-day exponential moving average is an additional concern for short-term bulls as it points to loss of momentum.
So, unless Bitcoin climbs back above this moving average and the old support in the $8000-$8160 region and hold there, or forms a distinct reversal pattern at lower levels first, the path of least resistance remains to the downside in the short-term outlook.
Source: TradingView and FOREX.com.