Over the past two weeks Bitcoin (BTC) has formed an uncanny correlation to traditional safe haven assets like Gold, with its price rising as tensions within the Middle East region began building earlier this month and falling when these tensions showed signs of decreasing.
BTC broke below $8,000 overnight after the situation between the US and Iran showed signs of resolving itself, and analysts are now noting that BTC could be in for a significantly deeper pull back, putting its chance at another parabolic rally in grave jeopardy.
Bitcoin Plummets 5% and Breaks Below Key Support Level
At the time of writing, Bitcoin is trading down just under 5% at its current price of $7,930, which marks a notable decline from its recent highs of $8,400 that were set at the peak of the recent rally.
This rally started in early-January close on the heels of the US drone strike on a top Iranian military official, with the rally slowly gaining momentum until this past Tuesday, when bulls roared and propelled the crypto past the resistance that existed at $8,000.
This price, which subsequently became a key support level, was decisively broken below yesterday when bulls ramped up their selling pressure.
The increase in selling pressure came nearly instantly after the world learned that – for the time being – the US does not appear to have plans to retaliate against Iran for their recent missile strike on an Iraqi military base.
The retrace from Bitcoin’s recent highs has led it to form an incredibly bearish pattern on its long-term candles, with its 3-day candle being close to posting a bearish reversal hammer, should it break below its EMA26 at roughly $7,700.
“$BTC – 3day candle closes later today, looking like a shooter than a hammer, but closing above EMA26 support would be notable…still a ways to go for a bull cross test, on this higher time frame,” Big Chonis, a popular crypto analyst, explained.
$BTC – 3day candle closes later today, looking like a shooter than a hammer, but closing above EMA26 support would be notable…still a ways to go for a bull cross test, on this higher time frame pic.twitter.com/4WLp0lnFE6
— Big Chonis Trading? (@BigChonis) January 9, 2020
How Deep Can This BTC Pullback Go?
Josh Rager, another popular crypto analyst, recently noted that he believes the ongoing pullback could “go deeper,” and how it responds to the support around its current price will offer insight into just how far the sell-off could extend.
“$BTC can certainly go deeper than originally expected. Target hit, but if this bounce is weak will look to short and re-enter at a lower target. The only reason to be bullish short- term before was geopolitical news/rumors that has since changed. Shorting $84xx was the trade opp,” he noted.
$BTC can certainly go deeper than orginally expected
Target hit, but if this bounce is weak will look to short and re-enter at a lower target
The only reason to be bullish short- term before was geopolitical news/rumors that has since changed
Shorting $84xx was the trade opp https://t.co/mopz5axkPI
— Josh Rager ? (@Josh_Rager) January 9, 2020
If Bitcoin fails to hold above the support it has found around its current price, it could spark a near-term downtrend that forces it to cut into a significant amount of its recent gains.
Featured image from Shutterstock.