The recent price volatilities in cryptocurrency trading have seen in Bitcoin breaking below the key level of $60,000. According to ZERO Market’s MT4 platform, Bitcoin is currently trading near $54,200 on Thursday afternoon.
Michael Purves from Capital Adviser is weighing in on crypto for virtually the first time based on the bearish signs from the technical analysis. Bitcoin’s recent high was not supported by its relative strength index (RSI) due to the divergence between the price and RSI signals. This is a sign of fading upward momentum, he said.
From a technical perspective, the bullish case appears to be highly challenged in the near term according to Purves. His comment on Bitcoin is too big for Wall Street to ignore as more institutional money and assets are tied to Bitcoin performance.
JP Morgan strategist Nikolaos has also expressed their concerns and noted the negative price action in Bitcoin despite buyers returned in time to prevent deeper plunges. If Bitcoin is unable to break about $60,000 soon, the strategist suggests that the momentum indicators will collapse.
Bitcoin futures in the last few days have experienced a liquidation similar to the pullbacks to the middle of last Feb, middle of last Jan, or the end of last Nov. Momentum signals will naturally fade given their elevated level for more months to come.
However, in the previous three cases, the overall buyer flow was able to propel Bitcoin prices to break out above key levels, yielding continue buildups in position by momentum traders.
Will we see another wave of flow impulse in the current conjuncture remains to be answered by the market. The odds appear out of cryptocurrency traders’ favor as the decay in momentum seems to be more severe and hard to reverse. Moreover, fund flows into Bitcoin also appear weak.
“Whether we see a repeat of those previous episodes in the current conjuncture remains to be seen,” the strategists said. The likelihood it will happen again seems lower because momentum decay seems more advanced and thus more difficult to reverse, they added. Flows into Bitcoin funds also appear weak, they said.
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