Tight range trading is usually followed by an expansion in volatility and that is what happened with Bitcoin on August 17. Bitcoin plunged more than 10% during intraday trading but then recovered some of its losses and finished the day down about 7%.
There was no specific news that caused the fall but some analysts believe that rumors of SpaceX having sold its Bitcoin holdings may have caused panic amongst traders. Whatever the cause, the sharp decline resulted in massive liquidations for derivatives traders. The billion-dollar liquidation was the biggest since the FTX collapse in 2022. Forced liquidation of leveraged positions and stops of short-term traders getting hit may have exacerbated the decline.
We warned in the previous analysis that if Bitcoin plummets below $28,477, it could start a downward move to $27,000 and then stay range-bound between $25,000 and $31,050 for some time and that is what happened. The bulls failed to sustain the BTC/USD pair above the 20-day exponential moving average (EMA) on August 14, and that started a sell-off on August 15.
The bearish momentum picked up on August 17 and the pair nosedived near the critical support at $25,000. Buyers are trying to start a recovery but the shallow bounce suggests a lack of urgency among the bulls to buy at current levels. A weak bounce will encourage the bears to make another attempt to break the $25,000 support. If they succeed, the pair could start a deeper correction toward $20,000. There is a minor support at $24,000 but that may not hold. A ray of hope for the bulls is that the relative strength index (RSI) is in the oversold territory.
This indicates that the selling may have been overdone in the near term and a recovery or consolidation is possible. On the upside, a break and close above $27,000 could start a relief rally to the 20-day EMA. A break and close above this level will indicate that the range-bound action may extend for a few more days.
Lastly please check out the advancement’s happening in the cryptocurrency world.
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