Bitcoin (CRYPTO: BTC) was diving over 6% lower on Tuesday after creating a bear trap on Monday with a failed breakout from a bull flag pattern on the daily chart.
The cryptocurrency market has become slightly less volatile recently but has suffered a number of flash-crashes this year. Perhaps the most notable turbulence occurred on Sept. 7 when Bitcoin slid over 18% the day El Salvador adopted the crypto as legal tender. Most recently, on Dec. 4, Bitcoin plummeted over 21% in response to trader and investor fear over the Federal Reserve’s tapering announcement and its effect on the crypto sector.
Tuesday’s pullback is so far less extreme and if Bitcoin can hold above a key level there is a chance the crypto could reverse back to the upside.
The Bitcoin Chart: On Dec. 17, Dec. 18 and Dec. 20, Bitcoin printed a bullish triple bottom pattern at the $45,496 level and on Dec. 21 big bullish volume came in and pushed the crypto up to make a higher high, which was the first indication an uptrend may begin. The move higher also caused Bitcoin to break up bullishly from a falling channel the crypto had been trading in since Dec. 7.
The uptrend is now negated because Bitcoin printed a lower-low below the Dec. 26 low-of-day at the $48,351 level. In order for a downtrend to be confirmed, however, Bitcoin will need to print a lower high over the coming days.
If Bitcoin loses support at $45,496 it could spell trouble because Bitcoin has not traded below the area since Oct. 1. Ideally, bulls would like to see Bitcoin test and hold above the upper descending trendline of the falling channel.
It may give bulls pause that Tuesday’s bearish price action took place on far-above-average volume. By midafternoon, Bitcoin’s volume was registering in at about 18,380 compared to the 10-day average of 12,063. Higher-than-average volume on a move lower indicates the bears are in control, and fear-selling can follow.
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Bitcoin has resistance above at $48,475 and $50,505 and support below at $46,718 and $44,850.