Bitcoin broke below the short-term support levels at the triangle and rising trend line, so bulls might need a larger correction before sustaining the climb. Price is still inside a new ascending channel forming on the 4-hour time frame and a test of support might be in the cards.
This channel bottom lines up with the $6,800 level and former resistance, which might hold as support moving forward. It’s also near the 200 SMA dynamic inflection point.
On the subject of moving averages, the 100 SMA is above the longer-term 200 SMA to indicate that the path of least resistance is to the upside. This confirms that the uptrend is more likely to resume than to reverse. However, bitcoin has tumbled below the 100 SMA dynamic inflection point to signal a bit of bearish pressure.
RSI is also heading lower to signal that sellers have the upper hand, but the oscillator is dipping into oversold territory to reflect exhaustion. Turning back up could bring buyers in, possibly allowing the mid-channel area of interest at $8,000 to hold.
Stochastic is also heading lower so bitcoin might follow suit, but it’s also approaching oversold levels. Turning back up could mean a return in bullish pressure and a bounce back to the channel top around $8,500.
Bitcoin suffered a sharp tumble after it was reported that authorities in South Korea are considering passing legislation to end tax benefits for cryptocurrency exchanges. They pointed to the strong surge in transaction volumes but the potential lack of security capabilities to guard against money laundering and illegal activity financing.
According to Hong Seong-ki, head of the country’s cryptocurrency response team South Services Commission:
While crypto markets have seen rapid growth, such trading platforms don’t seem to be well-enough prepared in terms of security. We’re trying to legislate the most urgent and important things first, aiming for money-laundering prevention and investor protection. The bill should be passed as soon as possible.