Bitcoin Drops Sharply After $7,000 Rejection

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Bitcoin has continued its recovery, but a swift rejection of the $7,000 range this morning could spell trouble in the short-medium term. With a daily support line now firmly established however, it might well be a waiting game to see how markets respond to last night’s announcement of a $6 trillion coronavirus fighting fund to see where Bitcoin goes from here.

Bitcoin Tops Out After Steady Progress

Bitcoin has made steady progress since its collapse to $3,850 on March 12, offering those who managed to buy the bottom almost a 2x return. It has so far respected what is now a two-week trendline which could be part of a pattern of gradual recovery to pre-crash levels:

Bitcoin Drops Sharply After $7,000 Rejection

This morning saw a jump to the $7,000 ceiling heavily rejected however, plunging Bitcoin down over $500 shortly afterward, breaching a recently established hourly support as it did:

Bitcoin Drops Sharply After $7,000 Rejection1

The rejection of $7,000 is not much of a surprise in the current climate, but what is more important is reclaiming these support lines if we want to see a steadier recovery. Bitcoin is currently at risk of forming a tweezer top on the daily chart, suggesting that the top could be in for the recent rally.

To avoid this we need to see Bitcoin reclaim some of its lost momentum fairly quickly. Failure to reclaim recently established supports could see Bitcoin lose the gains it made this week, and could lead to revisiting the high $5,000s at least, something that others are all too aware of:

Is the S&P 500 Tail Wagging the Bitcoin Dog?

Another factor that needs to be taken into consideration is Bitcoin’s uncanny correlation with the S&P 500, the index that measures the performance of 500 large US companies:

Given that the Trump administration yesterday agreed on a $6 trillion stimulus deal we will likely see a reaction in the markets, with many suggesting that there could be a ‘sell the news’ event which could drive prices lower:

With Bitcoin still by and large at the mercy of higher forces it takes a brave person to be trading right now, with the most sensible course of action waiting to see how things play out for a few days at least.