With Bitcoin trading below $7,000, technical indicators show it’s nearing a key inflection point.
Based on its drop over the past week, the biggest cryptocurrency is drifting in a narrow trading band, with support at $6,500 on the downside and strong resistance at $7,000 on any potential increases.
However, the GTI Vera Convergence Divergence Indicator, which measures up and down shifts, shows a narrowing of the bull trend that started in mid-May, which potentially indicates Bitcoin may be losing steam and could re-test the $6,500 level.
“The cycle of coronavirus case updates, stock market action and central bank interventions are creating the same repeated movements in the crypto markets, and this would be difficult to move out of until the pandemic starts to decline,” said Christel Quek, chief commercial officer and co-founder at Bolt Global.
Cryptocurrencies have moved in tandem with riskier assets this year as the coronavirus epidemic shuttered economies around the globe. Digital assets came under pressure during the initial risk-off phase but have trended higher this month in conjunction with a surge in U.S. stocks.
Bitcoin was trading above $7,000 as late as Thursday but has since fallen about 6%. It rose as much as 1.5% in Tuesday’s session to around $6,931 in New York. Overall this year, the largest digital token has lost more than 4%.
Bitcoin’s recent weakness could be a red flag for overall risk appetite, according to Ed Moya, a markets analyst at Oanda Corp. “If financial markets are at a key inflection point and the overall risk-on trade has run out of steam, cryptocurrencies could be the first major asset class that gets sold,” Moya wrote in a note this week. “Bitcoin could be very vulnerable here as investors become nervous that the snapback rebound is about to get faded.”
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