Bitcoin Resistance at $7,000 Shot the Price Down Again

In the midst of the recovering optimism, Bitcoin resistance at $7,000 withstood the pressure and sent the price spiraling down towards $6,000 again. How will Bitcoin react to the latest blow?

Fundamental Vs. Technical

After Bitcoin hit the $4,000 bottom, the market was in widespread panic. And rightfully so since the coronavirus not only damaged crypto but the traditional markets as well. Nevertheless, the cryptocurrency market is somewhat detached from the inside influence of the world’s governments. Therefore, it looked like people realized the potential crypto holds in regard to its predictable inflation.

Yet, all these are fundamental reasons to pick crypto over the government-backed or fully regulated currencies and assets. But we are here to bring you some technicalities since, fundamentally, there are many things wrong with the world today.

Bitcoin Resistance – Only a Small Level in the Big Channel

Just as a reminder, as we already stated in one of our analyses, the descent towards $4,000 was expected. Let’s see what we can expect further.

Bitcoin resistance channel

What you see in the BitMEX perpetual BTC/USD daily chart above is a possible descending channel. It seems that Bitcoin, after hitting the lower low at $3,500, bounced off the channel’s median line. Naturally, until the price hits the extremes thee times, it is difficult to talk about any kind of formation. However, Bitcoin seems strangely attached to the green channel’s extremes as well as to the full pipe.

Since $3,500, Bitcoin took a sort of a rising wedge path towards the middle of the to-be channel. Since this formation usually announces a bearish reversal, the price broke down from the formation. Yesterday, after testing the $7,000 resistance level, Bitcoin violently rejected the price and took a dive. The current price of $6,200 might not be the bottom. Especially since there are things in the derivatives market we should not overlook.

The Dwindling Open Interest

When trading the derivatives market, each trader should be aware of the open interest indicator and learn how to use it.

Bitcoin resistance open interest

In the chart above, we can see the interconnection of the open interest, buy/sell volume and the price of the asset. The declining open interest means that the new money isn’t entering the market. Consequentially, the price can withstand the pressure and, upon hitting the resistance, it slips to a lower level.

Analogically, the buy/sell volume is slowly turning negative. This means that, in the midst of the money drouth, those who do trade are turning bearish. This is the case because the fresh cash simply isn’t there to drive the price upward. Adding the declining volume to the equation, we have a natural reaction – the bearish reversal.

Bitcoin Resistance is at $7,000. But Where is the Support?

Looking at the still unconfirmed descending channel, it shouldn’t be long before BTC sinks towards $5,000. However, that would be just the first support level.

Looking at the big channel in formation, $6,000 would only be the green’s extreme. If the buyers won’t be able to support BTC there, the next level would be at $3,000.

Yet, there is another angle to this.

If we take a look at the Fibonacci retracement, we can see how it doesn’t consider $7,000 to be a crucial level. In fact, the next resistance level, according to Fibonacci, should be at $7,500 (0.618). Therefore, Bitcoin still has a chance to go there if it gets enough from buyers.

Bitcoin resistance fibonacci retracement

On the other hand, in the negative scenario, for Bitcoin to go all the way down to $3,000, it should pass below the 0.0 Fibonacci retracement level at $3,500. We are aware that this is a rare thing for a cryptocurrency to bottom out below its a year and a half low. Yet, in these market conditions and with all the panic people unaware of the true nature of crypto feel, it is still possible.

Accidentally, this forecast perfectly aligns with the big analysis which announced that $4,000 was on the way. Accidentally, or maybe not…


All charts in the article were analyzed on Coinalyze.net – the professional trader’s analysis tool.


Disclaimer:

You should look elsewhere for investment advice since this isn’t it. Even if it looks like it, it’s not. Cryptocurrencies are extremely volatile and risky speculations. Always do your own research. Consider consulting an investment professional prior to investing your money.



When you start feeling the irresistanbe urge to share our content and click on one of the icons below, you’ll be rewarded with Sharpay (S) Tokens. Now, ain’t that cool or what? Getting paid for sharing!! Of course, to receive your tokens, you’ll need a Sharpay crypto wallet. Therefore, first you need to register on Sharpay’s OFFICIAL WEBSITE and the wallet is there.

Thanks for sharing!

😉