Short-Term Top? Bitcoin Price Seeks Direction on Choppy Charts

Back to square one?

As per CoinDesk Bitcoin Price Index (BPI) data, bitcoin smashed previous price records to hit $7,355.35 at 11:17 UTC today, only to crash back below $7,000 soon after. At press time, bitcoin is trading at $7,011.

As per CoinMarketCap, the cryptocurrency has gained 7.19 percent in the last 24 hours. With the continued record-breaking run fueling accusations that bitcoin is in a bubble, the cryptocurrency has rallied more than 120 percent from the September lows below $3,000.

But are there fundamentals behind the gains?

It certainly looks possible as bitcoin’s trading community continues to cheer a potential listing on the CME, which is seen as opening doors for profit-hungry institutional investors.

Elsewhere, bullish sentiment is proving strong enough potential headwinds with the upcoming SegWit2x hard fork, effectively a bout of uncertainty in its technical roadmap, have been pushed to the sidelines. The proposal, which would increase the block size from 1MB to 2MB, is scheduled to happen in about 2 weeks from now.

While the hard fork is intended to be a simple software upgrade that would become the dominant bitcoin code, there’s also the risk of a split into two rival assets: bitcoin and a “Segwit2x coin.” Should that happen, holders of bitcoin would effectively receive free cryptocurrency, and it appears the investor community may be snapping up bitcoins on that hope.

Though some investors might be wary of the coming hard fork, the sharp retreat from the record highs seen today is likely to be chart driven.

Still, the price action analysis warns of a potential bearish reversal pattern.

The chart shows:

• A sharp retreat from session highs. The daily candle carries a long upper shadow, which indicates bullish exhaustion.
• A bearish price-relative strength index (RSI) divergence (higher highs on price, lower highs on the RSI) would be confirmed if today’s candle turns red (i.e. prices end the day below $6,759).

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• A confirmation of bearish price-RSI divergence would signal short-term bullish-to-bearish trend change. In such a case, bitcoin could revisit $6,000-$5,700 levels. The move would qualify as a healthy correction, given the cryptocurrency is up more than 500 percent this year.
• A short-term consolidation in the range of $6,500-$7,400 looks more likely.