BTCCNY appears to be pausing from its climb, hinting that buyers may be taking a break and letting sellers take over from here. Profit-taking could be in play as the EU referendum is nearing.
RSI is indicating overbought conditions and is turning lower, suggesting that bearish pressure could push for a correction to the Fib levels. The 61.8% Fib lines up with an area of interest and might be in the line in the sand for any pullback from the uptrend. Stochastic is also in the overbought area but hasn’t crossed down yet.
The 100 SMA is above the 200 SMA to indicate that the uptrend is likely to carry on. However, the gap between the moving averages is shrinking so a downward crossover could be possible. In that case, more sellers could take control of price action and push for a large correction.
The EU referendum is set to take place this week and traders might be booking profits off their long positions earlier in the month. After all, a vote to stay in the EU could bring some calm back in the financial markets and restore demand for equities and currencies.
So far, uncertainty over the upcoming vote and fears of instability on a vote to exit the EU are driving traders away from stock markets and currencies, particularly in Europe. This has shored up demand for alternative assets such as bitcoin. In addition, Chinese investors anticipating further weakness in their equity market and local currency are also flocking to bitcoin.
But with several market indicators showing overbought conditions and with the event risk about to pass, buying pressure could be exhausted at this point. An unwinding of this “uncertainty” trade could lead to a massive selloff, but buyers could still be waiting with their long orders at key levels.