BTCUSD recently broke below a rising wedge formation visible on its 1-hour time frame, signaling a pickup in bearish pressure. Price has dipped to the $2500 area then pulled up for a correction to the nearby Fib levels.
In particular, the 61.8% retracement level near the $2800 resistance seems to have held as a ceiling. In that case, BTCUSD could be ready to resume its drop to the swing low or to new ones. Note that the wedge spans $2000 to $3000 so the resulting selloff could be of the same size.
Stochastic is on the move down so BTCUSD might follow suit. RSI, on the other hand, is still pointing up to suggest that there may be some buying pressure left. The 100 SMA is above the longer-term 200 SMA to show that the path of least resistance is to the upside, but the gap is narrowing and a downward crossover seems due.
In addition, the moving averages are close to the highest Fib, adding to its strength as resistance. If that gives way, bitcoin could pull up higher to the broken wedge support around $2900 before resuming its drop. A break past that area could put it back on track towards testing $3000 or even establishing new record highs.
Many are pointing to the tech sector tumble on Wall Street as the main cause for the bitcoin price drop, but the reality is that the selloff started much earlier in the day. As it turned out, a few exchanges like Coinbase and BTC-E had reported downtime due to unprecedented levels of traffic and trading activity.
This led many to speculate that the bitcoin network might no longer be able to handle an additional influx in transactions from here, and that developers might need to come up with a solution for this issue. This also reinforced fears that the cryptocurrency is in a bubble and might crash soon, leading several investors to get spooked into liquidating their positions.