Bear Trap? Bitcoin Price Dips Below $10K on Low Volumes

Published on by Coindesk | Published on

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View Bitcoin's drop from $10,949 to $9,855 may be a bear trap, as selling volumes have dropped throughout the price pullback.

On the lower side, a high-volume drop below $9,855 could pave way for a deeper drop toward $9,500.

Bitcoin has recovered from nine-day lows hit earlier on Wednesday and may pick up a strong bid during the day ahead. The leading cryptocurrency by market value fell to $9,855 on Bitstamp during the Asian trading hours, the lowest level since Sept. 2.

The sellers need to observe caution, as the recent pullback lacks volume support and may prove a bear trap, as seen in the chart below.

Selling volumes have been consistently higher than buying volumes through the price pullback from $10,950 to $9,855.

The red bars have produced lower highs, meaning the selling volume, or pressure, has eased along with the price.

A falling wedge comprises of converging trendlines connecting lower highs and lower lows and is widely considered a bullish reversal pattern.

The breakout looks likely as the moving average convergence divergence histogram, a widely-tracked trend following indicator, is reporting a bullish divergence - higher lows contradicting lower lows on price.

The bullish case would weaken if prices drop below the previous long-tailed candle's low of $9,855 with a solid rise in selling volumes.

The long tails attached to the previous three candles indicate dip demand near the daily lows or bearish exhaustion - in effect, the sellers fought to keep prices lower, but lost as the buyers pushed the price up.