Bitcoin is looking heavy today after failing to see a decisive move higher in the last 24 hours.
While bitcoin (BTC) clocked a lifetime high of $17,631.42 just two days ago, it has since retreated to sub-$17,000 levels, as per CoinDesk's Bitcoin Price Index (BPI).
As of writing, the cryptocurrency is trading at $16,628. As per CoinMarketCap, BTC has depreciated by 2.0 percent in the last 24 hours, though it is still up 8 percent over the last 7 days.
The slow descent in prices is possibly due to alternative currencies garnering more attention from traders and investors. For example, ether has jumped 12 percent in the last 24 hours to a new record high of $747.59. Bitcoin cash and ripple have also appreciated notably – by 24 percent and 16 percent, respectively.
Parallels could be drawn between the action seen in the cryptocurrency over the last few weeks and the behavior in the stock markets.
Major equity indices are usually the first to rally. Once the large-cap valuations look overstretched, investors tend to rotate money out of large caps and into small caps. Investors who missed the bus, also chase the relatively undervalued small-cap stocks. Thus, non-index stocks/small caps begin rising after a rally in the index stocks looks overdone.
On similar lines, the signs of weakness in BTC could be due to investors chasing the small-cap cryptocurrencies. Bitcoin rallied sharply from its Sep. 15 low below $3,000 to the recent record high of $17,631.42. Comments on social media indicate a growing concern among investors over the pace of ascent in BTC prices.
Hence, new buyers could continue to focus on other options in the short-run, leading to a correction in BTC prices. The price chart analysis also points to increased odds of a pullback.
The above chart shows:
- Rounding top pattern
- Head-and-shoulders breakdown.
Both features indicate a short-term bullish-to-bearish trend change.
As per the measured height method, the head-and-shoulders breakdown has opened the doors for a drop to $15,350 levels.
The above chart shows a bearish doji reversal (marked by circles) followed by a falling, descending top pattern (as indicated by a falling trend line).
As per the 4-hour chart (BTC/USD), the cryptocurrency looks set to test $15,884 (confluence of the ascending 50-moving average and the rising trend line).
On the higher side, only a move above $17,746 would signal a revival of the bull run. In that case, the cryptocurrency could attack $19,697 (Dec. 7 high) and possibly $20,000 levels.
Escalator image via Shutterstock