Bitcoin Performance Spells Trouble for Bulls

Reading Time: 2 minutes
  • Bitcoin has underwhelmed since its drop to $30,000
  • Bitcoin has failed to close above the key $42,000 level and buy volume is negligible
  • A period of consolidation or further downside is on the cards

Bitcoin’s anemic performance since dropping to $30,000 last week has suggested that there could be further downside to come before we can think of eclipsing the prior highs. A series of lower highs has resulted in Bitcoin getting further and further away from the crucial $42,000 level it needs to cross for bullish continuation, while analysis of volume shows that there are very few buyers stepping in at these levels.

Earlier this week we painted three probable scenarios for Bitcoin following its initial recovery from its drop to $30,000; one was a retake of of $42,000 which would likely usher in continuation higher, one was a period of ranging between $30,700 and $40,700, and the third was a collapse back through $30,000 towards the prior high of $20,000.

Since trying twice to conquer $42,000 in the past eight days and failing on both occasions, Bitcoin has since been putting in lower highs, with the buy volume getting lower and lower with each successive attempt to push higher:

bitcoin 1

Unless a sudden rush of buy volume comes in then we can discount the bullish scenario for now which leaves us with neutral and bearish outlooks:

bitcoin 2

bitcoin 3

A return to the $30,000 region is now looking more probable, although there is support at $35,000 that could offer some support:

bitcoin 4


The disappointing response to last week’s drop to $30,000 can be summarized by looking at the volume since the drop and comparing it with March 2020:

bitcoin volume


As we can see, the March 2020 drop resulted in a buying frenzy, with almost two weeks of solid buying that utterly eclipsed the sell volume. Compare that with last week’s drop – immediate buy volume was lower than it has been at many points in last year’s run up and is dwarfed by the sell volume. This clearly shows that very few people are interested in buying bitcoin even as low as $30,000s, suggesting that we have a way to drop yet before buying interest will pick up. All this supports the thesis that we are in for a period of consolidation around these prices, potentially with a further drop first.

Predictably, alts are suffering as a result of Bitcoin’s uncertainty, with most following Bitcon’s path and waiting for a definite pattern to resolve itself before any kind of confidence can return to the alt market. While holding quality alts is never a bad idea, those looking for short term trading opportunities might want to close their laptops and walk away for a few weeks until the situation resolves itself.