Bitcoin flipped bearish on Dec. 9 as all-time highs slipped from view and $17,000 prices returned.
At press time, lows of $17,640 had established some form of floor, with Bitcoin bouncing back over $18,000 to reach $18,500.
Big support lies below futures gap
The action effectively ended a multi-day period of consolidation for BTC/USD. Prior volatility had ended in a series of higher lows and lower highs on daily closes, a process known as compression.
Analysts had already warned that without a break higher, a retest of lower levels was all but guaranteed, with several factors influencing the downward pressure. These centered on the CME futures gap, a $1,300 void which Bitcoin managed to semi-fill with the latest dip.
As Modern Consensus has often explained, futures gaps—differences between Bitcoin futures prices at the end of trading on Friday and the start the following Monday—often get “filled” by the spot market later on. In this case, this set up a lower target for Bitcoin of $16,900.
While further losses would need to hit to seal the gap fully, a look at exchange buy and sell orders likewise confirmed little support at press-time levels.
Compiled by trading indicator producer Material Indicators, a summary of positions highlighted strong buy support only at $16,200, with resistance in place at $18,500. BItcoin thus had little room for gains higher, but little stopping it falling up to another 11%.
No concern among the bulls
Commenting on the price action, popular trader Scott Melker, known as the Wolf of All Streets, highlighted the relative strength index (RSI) as a key metric to watch.
“RSI travels from overbought to oversold and back. It hit oversold in the past few hours,” he told Twitter followers.
“The trip from oversold to overbought was nearly $4000. The trip back to oversold was $2200. Buying pressure. Would still love another low and a bull (divergence).”
RSI had already formed a preoccupation for others, with quant analyst PlanB noting that overall, the indicator was “looking strong” and in place for Bitcoin to begin a fresh bullish phase.
Beyond the short-term price picture, non-trading market participants were likewise more than satisfied with $18,000 Bitcoin. “Buy the dip” opportunities, they said, already abounded.
“#Bitcoin is looking awfully boring hovering between 18-19k. Feels like a tiger getting ready to pounce,” Gemini exchange co-founder Tyler Winklevoss considered.
Mike McGlone, senior commodity strategist at Bloomberg Intelligence, also zoomed out.
“In a World Gone Digital, #Bitcoin May Surpass #Gold,” he forecast on Wednesday.
“The past year has been a stepping stone for Bitcoin into the mainstream of investment portfolios and for the digital evolution of money, which should keep the benchmark crypto on an upward price trajectory in 2021.”