The Bitcoin price is at risk of a pullback, as all three components that typically lead to a decline in price have emerged.
The three factors are: a decline in open interest, drop in volume, met with rising price, which historically have caused the cryptocurrency market to correct.
Why these factors put the Bitcoin price at risk of further pullback
When the price of an asset rises without an increase in volume to supplement it, the asset tends to see a fakeout.
The term fakeout describes a trend that occurs when an asset sees a temporary upsurge before a major decline in price, confusing the market.
In the last three days, the Bitcoin price has seen a recovery from around $8,700 to $9,100, rising by around 4.5 percent against the USD.
However, the recent Bitcoin price upsurge was met with mediocre volume, leading technical analysts to be cautious about the short-term trend of the asset.
Josh Rager, a cryptocurrency trader, said that the possibility of a bullish continuation can only be confirmed after the Bitcoin price breaks out above $9,500 and holds the level.
At a larger scale, $9,500 also remains as a 0.618 level on the Fibonacci scale, which is generally used as a decisive point for the trend of an asset.
“Any long trade is a short term trade until Bitcoin can break and hold above the $9500s $9400s to $9500s has played an important S/R level since June 2019 - breaking above this level will be key for bullish continuation.
The most recent break below $9500 S/R area was quite decisive with ten straight red candles on the 4HR chart. I believe there is more downside before the bullish continuation above $9500. But you can't ever count out Bitcoin to throw you a few curves.”
The Bitcoin price has also been unable to break out above a near-term resistance level at $9,200, consolidating just below it.
Macro factors not in favor of BTC
While the block reward halving of Bitcoin has been referred to as an optimistic catalyst for BTC in the short-term, historical data suggests that it does not necessarily translate to near-term price spikes.
In the previous two halvings, the Bitcoin price did not go on an extended rally until six to eight months after the halving occured.
The coronavirus outbreak has also led to a decline in appetite for risk-on and high-risk assets in general, leading to a correction in the global stock market.
“For some odd reason, I don't think the Coronavirus is bullish for Bitcoin narrative makes much sense. The media talking about a pandemic isn't going to get people around the globe to buy a speculative asset, it's going to get them to buy preserved food and face masks,” well-known cryptocurrency trader DonAlt said.
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