Bitcoin's recent downtrend has deepened in the wake of a decision by the Securities and Exchange Commission (SEC) to delay a ruling on a keenly awaited bitcoin ETF.
The leading cryptocurrency was expected to stage a minor corrective rally in the last 24 hours, having defended the key 50-day moving average (MA) support earlier this week.
However, the sellers made a strong comeback above $7,100 after theSEC exercised its right to postpone the decision on whether to approve a rule that would allow Chicago Board Options Exchange (CBOE) to offer shares of a bitcoin ETF issued by VanExk SolidX Bitcoin Trust.
As a result, BTC closed (as per UTC) yesterday on a negative note at $6,719 and fell to $6,360 today – the lowest level since July 16. At press time, BTC is trading at $6,500 on Bitfinex.
The 7.9 percent sell-off witnessed in the last 24 hours reinforces the view that a major part of the rally seen in July was likely fueled by speculation that a Bitcoin ETF could be approved by the US SEC within weeks.
Further, the bear grip around bitcoin has strengthened in the last 24 hours as bitcoin's drop to three-week lows below $6,400 means the cryptocurrency has retraced more than 70 percent of July's rally to $8,507.
Still, as the SEC has merely delayed its decision until September, there is still a chance that the ETF could be approved next month.
BTC's break below the ascending trendline (drawn from the June 29 low and the July 12 low) has bolstered the already bearish technical setup.
For example, the 5-day and 10-day MAs are sloping south in favor of the bears, and BTC is trading well below the long-term MAs (50-day, 100-day, and 200-day) – all suggesting the path of least resistance is to the downside.
More importantly, perhaps, the relative strength index (RSI) is holding below 50.00 (in bearish territory), but has yet to hit oversold territory (below 30.00). Hence, there is scope for a further drop towards $6,000, albeit after a minor bout of consolidation as the short-duration technical charts (below) are reporting oversold conditions.
On the 4-hour chart, the RSI has dropped below 30.00, signaling the sell-off is overdone. As a result, BTC could trade sideways within a falling channel over the next day or two.
BTC's drop to three-week lows below $6,400 has likely strengthened the bear grip and opened the doors to $6,000 (psychological support).
The cryptocurrency might consolidate around $6,500 in the next 24 hours, as suggested by the 4-hour chart, before resuming the sell-off.
Only a high-volume break above the falling channel seen in the 4-hour chart would shift risk in favor of a re-test of $7,200 (200-candle MA).
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin image via Shutterstock; Charts by Trading View