Bitcoin was unable to sustain the strong bounce last week as it consolidates inside a small bearish flag pattern on the 4-hour chart. A break below support could confirm this bearish continuation signal.
The 100 SMA is below the longer-term 200 SMA to signal that the path of least resistance is to the downside. In other words, the selloff is more likely to continue than to reverse. However, the gap between the moving averages is narrowing to signal weakening bearish momentum.
RSI is also on the move up to show that buyers have some energy left in them. On the other hand, stochastic looks ready to turn back down so bitcoin could follow suit as sellers return.
Note that the mast of the flag spans around $6,200 to $7,800 so the resulting drop could be of the same height. On the other hand, a break higher could hit resistance at the moving averages’ dynamic inflection points.
The cryptocurrency drew support last week when a senior SEC official said that like ethereum, bitcoin is not a security that can be regulated like stocks or bonds. However, the return in risk aversion and dollar strength on Trump’s tariffs announcements erased those gains.
The US government has imposed tariffs on billions’ worth of Chinese goods and China has responded with higher tariffs of its own on US exports. Note that the US is also at odds with Canada, Mexico, and the EU when it comes to trade arrangements and the repercussions could be very negative for the global economy.
With that, it’s understandable that traders are flocking back to the US dollar and dumping riskier assets like bitcoin in the process. However, when it dawns on markets that much of the damage could be on the US economy, the dollar could return its gains and traders could pursue alternative holdings like digital assets instead.