The Bitcoin price (BTC) has dropped from $6,800 to $6,100 by around 10 percent within less than a day. Following the drop, BTC is now showing three signs of a deeper pullback to much lower support levels.
The three indicators are: substantial decline in the volume of CME bitcoin futures, noticeable drop in spot exchange volume, and a clean breach of a strong support level at $6,400.
What’s next for bitcoin?
The overnight drop in the bitcoin price led to the rejection of two major resistance levels: $6,900 and $6,400.
Prior to the minor correction, prominent cryptocurrency technical analyst Cred said that the bitcoin price was retesting weekly resistance. Historically, when the bitcoin price tested a key resistance level with low volume and non-existent buying demand, it often reacted with large drop.
Cred said on March 27:
“Retesting weekly resistance. Daily market structure is bullish but i) weekly close was bearish; and ii) no daily close above resistance ($6900) yet. My bias is bearish until at least >$6900 (daily) but if resistance breaks a teleport is more likely than a pullback.”
With the 10 percent drop, the bitcoin price cleanly rejected $6,900 and is on track to close its weekly candle with a rejection of two key levels.
The underwhelming price trend of bitcoin put together with a near 90 percent retracement in the volume of the CME bitcoin futures market could allow heightened selling pressure in the market to suppress the bitcoin price.
According to data from Skew, the total daily volume of the CME bitcoin futures market plunged from $595 million in mid-March to $101 million, by well over 83 percent in March alone.
Spot exchanges show a similar trend, possibly due to the abrupt drop in the bitcoin price on March 12 to $3,600 that triggered fear of missing out (FOMO) amongst investors in the cryptocurrency market.
A lack of buy orders and volume at a time during which miners could sell more BTC to cover for expenses in the short-term could only intensify selling pressure in the market.
Big imbalance between buyers and sellers
As shared by a cryptocurrency trader, the order book of the bitcoin perpetual futures contract on BitMEX shows a massive imbalance between buyers and sellers, with sellers evidently in firm control over the market.
For that reason, traders have said that the probability of bitcoin bursting through $6,900 to aim for the low-$7,000 region is substantially low.
“Decently big imbalances between bid and ask side on bitmex... $7,000 would be a tough nut to crack,” one trader said.
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