Bitcoin encountered an area of interest at the $7,000 mark on its recent pop higher, which may have been just a shallow pullback from the slide. A continuation of the selloff could take bitcoin to the downside targets marked by the Fibonacci extension tool.
In particular, the 38.2% extension lines up with the swing low at $5,900 then the 50% extension is near the $5,600 psychological support. Stronger selling pressure could take it down to the 61.8% extension at $5,274 or the 78.6% extension at $4,825.70. The full extension is at $4,254.10.
The 100 SMA is below the longer-term 200 SMA on this time frame to confirm that the path of least resistance is to the downside. In other words, the selloff is more likely to continue than to reverse. Price moved briefly past the 100 SMA dynamic inflection point but has since moved back down.
RSI is pointing up, though, so there may be some bullish pressure left. In that case, bitcoin could make another attempt at pushing past the $7,000 area of interest to sustain the rally. Stochastic is also turning higher without reaching oversold levels, indicating that buyers are eager to return.
Bitcoin tumbled after the SEC rejected the bitcoin ETF applications from ProShares and Direxion this week, putting the industry a step back in terms of getting a thumbs up from regulators. Another set of ETF applications are awaiting their ruling next month.
Until then, bitcoin traders could hold out for the actual decision or any indication how it might turn out. Keep in mind, however, that the SEC has reiterated that the applications don’t show sufficient measures to rule out potential price manipulation and fraud, so the rest of the proposals might get similar concerns.
Still, it’s noteworthy how buyers continue to defend the long-term floor around $5,800 to $6,000 so another dip could see a bounce off this levels again.