Bitcoin (BTC) price analysis 6 Dec: is a drop to $40,000 likely?

Bitcoin (BTC) may remain under pressure in the short term

A visualisation of a bitcoin on a circuit board                                 
Will bulls be able to push the bitcoin price back above the important $50,000 level – or could it fall to $40,000? – Photo: Shutterstock
                                

Bitcoin plunged some 20% on 4 December to below $43,000 levels. This decline pulled the total crypto market capitalisation to about $2.32trn, a 25% decline from the high of $3.07trn on 9 November, according to Coingecko data.

Several reasons may have led to the sell-off. Justin d'Anethan, institutional sales manager at cryptocurrency exchange EQONEX, told Reuters: “Whales in the crypto space seem to have transferred coins to a trading venue, and taken advantage of a bullish bias and leverage from retail traders to then push prices down." 

According to the digital asset management firm NYDIG, about $2.5bn of crypto leveraged positions were squared off during a 24-hour period, the largest liquidation since 7 September.

Another move that may have shaken up the bulls is the US Federal Reserve’s taper talk. Louis Navellier, chairman and founder of Navellier & Associates, warned in an interview with London-based news outlet Insider that the Fed’s tapering “should create a correction in risk assets, of which bitcoin is a part”. Navellier is uber-bearish on bitcoin, believing it could drop below $10,000.

However, NYDIG said in a recent note that some positive trends are visible in bitcoin and crypto. “On our desk, we have seen two-way flows today, with 84% of the flows being buys on our trading desk, excluding tax-loss harvesting trades,” the company said, according to MarketWatch.

Has a bear phase started or will bitcoin go up? Let’s see what the charts project. Read our BTC price analysis to find out.  

Bitcoin price technical analysis: weekly chart

Bitcoin price technical analysis: weekly chart
Bitcoin price technical analysis: weekly chart – Credit: Currency.com

BTC’s price turned down sharply last week and broke below the moving averages. A minor positive was that bulls bought the dip and the BTC/USD pair closed above the 50-week simple moving average (SMA).

The pair declined 13.68% over the previous week’s closing price to finish the week at $49,485.

The 20-week exponential moving average (EMA) has started to turn down and the relative strength index (RSI) has slipped into the negative territory. This indicates that bears have the upper hand.

If the price breaks and sustains below the 50-week SMA, the selling could intensify and the pair may drop to $39,565.25. This is an important level for the bulls to defend because a break below it could open the doors for a possible drop to $28,286.

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Contrary to this assumption, if the price rebounds off the 50-week SMA and rises above the 20-week EMA, it will suggest that bulls are accumulating at lower levels. The pair could then rise to $60,000.

The bitcoin price analysis shows that bears are attempting to sink and sustain the price below the 20-week EMA, which could signal a trend change.

Bitcoin price technical analysis: daily chart

Bitcoin price technical analysis: daily chart
Bitcoin price technical analysis: daily chart – Credit: Currency.com

BTC’s price has been trading inside a descending channel pattern for the past few days. The bears pulled the price below the support line of the channel on 4 December but could not sustain the lower levels.

Strong buying by the bulls pushed the price back into the channel. The bulls successfully held the support line on 5 December but the failure of buyers to propel the pair above the psychological level at $50,000 indicates that bears are selling on rallies.

The bears are attempting to sink the price below the channel. If they succeed, the pair could decline to the strong support zone of $42,827.90 to $39,565.25.

The bulls will have to push and sustain the price above the resistance line of the channel to signal the end of the downtrend.

Bitcoin: Buy or sell at current levels?

The bitcoin price analysis shows that bears are selling on rallies to the psychological level at $50,000. If the pair does not climb back above this level quickly, the possibility of a further downside increases. Alternatively, a break and close above $50,000 will signal the bulls are attempting a comeback.

The views and opinions expressed in the article are those of the author and do not constitute trading advice. Trading and investing involve substantial risks and you should do your own research or contact your financial adviser before arriving at a decision. Never invest more than you can afford to lose and keep in mind that past performance is no guarantee of future returns.

Bitcoin to US Dollar
Daily change
17134.1
Low: 17087.2
High: 17268.4

Further reading

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