Bitcoin - Does drop in volume foreshadow end of the rally?

Bitcoin continues to march higher and technical indicators point to the upside. However, there is one ominous warning sign in a market and that is volume. Just within seven days, BTCUSD rose over 16%. At the same time, the volume has decreased. Meanwhile, 50-day SMA and 100-day SMA remain in the bearish constellation. At the moment, 100-day SMA acts as the important support level for BTC. If the price retraces back below it then the rally is likely to halt and the trend to reverse. Therefore, we will pay close attention to the 46 630 USD price level. If this level is broken then it will force us to abandon the price target of 50 000 USD. Indeed, we think such an occurrence could potentially lead to further weakness in the cryptocurrency market and see the price of BTC going much lower.

Illustration 1.01

The chart above shows the current setup for a short position on BTCUSD.

Technical analysis - daily time frame
MACD and Stochastic remain bullish. RSI is bullish but it nears overbought condition. The inability to penetrate through 70 points would be bearish for BTC. DM+ and DM- are bullish. ADX continues to increase which signals that the prevailing trend strengthens. Volume has decreased substantially over the past week while Bitcoin saw a price rise of more than 16%. This is very negative for BTC and it will most likely lead to a liquidity issue. Subsequently, that will result in a trend reversal. Even though the daily time frame is bullish, the volume flashes warning signs.

Illustration 1.02

Illustration 1.02 shows BTCUSD on the daily time frame. A decrease in volume can be observed over the past seven days.

Technical analysis - weekly time frame
RSI is bullish and Stochastic is also bullish. MACD strives to perform a bullish crossover above 0 points. If it manages to do so, then it will be bullish for BTC. However, until then, it remains in bearish territory. DM+ and DM- are bullish but ADX contains a relatively low value. That suggests the trend is neutral. Overall, the weekly time frame is bullish but with the presence of no significant trend.

Support and resistance

Simple support and resistance levels are derived from peaks and troughs.

Please feel free to express your own ideas and thoughts in the comment section.

DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not serve as a basis for taking any trade action by an individual investor. Your own due diligence is highly advised before entering a trade.

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BTCUSD dropped below 46 630 USD which is very bearish. Indeed, it forces us to abandon our price target of 50 000 USD. We think it is likely that the rally has lost its momentum. Furthermore, we think Bitcoin is due to start a correction. Our new price target is 45 000 USD.