Bitcoin (BTC) has been caught in the throes of immense bearishness over the past several days, with its overnight rally turning into a bout of capitulation after bulls failed to defend the crypto from dropping below its key support at $9,000.
In spite of BTC’s overt bearishness, analysts were previously noting that the support it has been able to establish around $9,000 may be enough to spark a notable relief rally, which could lead the crypto back into the mid-$9,000 region.
The technical damage caused by the cryptocurrency’s recent bearishness is likely enough to lead it to see significantly further downside, however, and unless it recaptures $9,000 in the coming few hours, the chance of it seeing a relief rally is low.
Bitcoin Bulls Struggle to Fight Back Back During Violent Selloff
At the time of writing, Bitcoin is trading down roughly 6% at its current price of $8,800, which marks a notable decline from daily highs of roughly $9,600 that were set just prior to the intense selloff the crypto faced throughout the latter part of yesterday.
This bear-favoring price action was first sparked by the cryptocurrency’s “flash crash” seen last Wednesday, when the cryptocurrency plummeted from highs of $10,200 to lows of $9,200.
The bearish near-term market structure created by this movement was further confirmed this past Sunday, when BTC experienced a harsh rejection at $10,000.
Teddy, a prominent Bitcoin trader and analyst, shared his thoughts on the cryptocurrency prior to its dip below $9,000, explaining that shorter time frames were showing signs of BTC being “heavily oversold,” suggesting that the crypto could soon see a relief rally.
“BTC: Shorter timeframes are heavily oversold – expecting a dead cat bounce to test previous support as resistance. Down channels traditionally break upwards,” he explained.
https://twitter.com/TeddyCleps/status/1232642791349551104
It’s still possible that Bitcoin is, in fact, oversold and that a relief rally is imminent, but it is imperative that it recaptures $10,000 in order for this possibility to be validated.
Despite Potential Relief Rally, BTC’s Outlook Is Incredibly Bearish
There’s no doubt that this potential upcoming relief rally will lead some investors and analysts to once again grow bullish on BTC.
In spite of this, it will likely be fueled by a squeeze of late short positions and may end once BTC taps a recently formed descending resistance level.
TraderXO, another well-respected trader, spoke about this in a recent tweet, saying:
“BTC – Time to squeeze out some late shorts. Playing the bounce to 94-95’s. Stop on the underside of the swing low.”
https://twitter.com/TraderX0X0/status/1232641035186114560
TraderXO does note that this notion is invalidated if Bitcoin decisively breaks below $9,000, which just further increases the urgency for bulls to reclaim this key level.
Even if this widely anticipated relief rally does occur, it may not be enough to fundamentally alter Bitcoin’s current market structure and will likely be closely followed by significantly further downside.
Featured image from Shutterstock.
