Bitcoin Price Analysis: Bitcoin Tests Boundary Support as Demand Weakens

Following last Friday’s drop, bitcoin has found itself coiled, once again, at the bottom of the range it established back in December. With the current market unable to close a new high, the market finds itself in a precarious position:

Figure 1: BTC-USD, Daily Candles, Range Support Test

The blue support level shown above illustrates the boundary of the multi-week range bitcoin has been bound by. At the time of this article, the market is testing the support level but has yet to close and continue below. We did see a temporary close below the support level, but there was a very short-lived rally on low volume shortly after popping the fresh low.

Figure 2: BTC-USD, Daily Candles, Secondary Support Level

Just below our immediate support level exists a secondary support level (shown in red) established by a market pivot a few weeks ago. It’s not entirely surprising that the drop inspired some eager bulls. It is still too early to tell, but the temporary support level doesn’t appear to be inspiring much demand. The price spread is low, the volume is low, and the rally was immediately stifled on modest volume. As mentioned in our previous analysis, this is kind of a no-man’s-land due to the market indecision within this range.

Figure 3: BTC-USD, Daily Candles, Upper and Lower Bound of Current Range

The figure above shows the overhanging resistance (shown in blue and red) that rejected the bullish attempts to break out. We can clearly see that the daily candles at the top of the range closed lower and lower, ultimately being rejected with high volume and high price spread.

Similarly, the market has seen lower and lower closes at the bottom of the range with lower reactionary volume and tighter spread. This sort of market behavior is indicative of high supply presence combined with relatively weak and waning demand.

Currently, we need to see if the market breaks and closes below the current low. If we manage to close below the current level, we can expect to see a test of the next support level in the low $3,000s. However, if we manage to exhaust the bears at this level, we can fully expect to see a test of the upper boundary of the range once again.

We are firmly bound in this price range, and a breakout of the range in either direction will likely yield a strong continuation in the direction of the breakout. As always, we must wait to see where the daily candle closes, but for the time being, the current market seems to be leaning toward a test of the lower support.

Summary:

1. For the last week, bitcoin has been pretty tightly coiled in a relatively narrow range.
2. We closed a lower low on the daily candles but have yet to break through support.
3. The currently price level is bordering on the no-man’s-land of the no-trade zone inside the range. If we manage to close below the current support level, we can expect to see a test of the low $3,000s. If not, we can most likely expect to retest the upper boundary of the range in the low $4,000s.

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