New York: Bitcoin bulls might be in for some bad news: technical indicators show the cryptocurrency could be entering a new downward trend.
The world’s biggest digital token entered a new negative divergence pattern on Thursday, according to the Directional Movement Index, a technical momentum indicator.
The index’s ADX line, which determines the strength of the trend, appears to have bottomed and has started to curl upwards. This could indicate that the negative trend is gathering momentum and that it could have more room to run.
All eyes remain on Bitcoin’s $6,000 (Dh22,000) support level, which the digital token has not tested since mid-August. The cryptocurrency has been trading sideways in a slightly positive divergence for the past three weeks, with the price hovering between $6,300 and $6,600. The price dropped nearly 5 per cent Thursday, extending its losing streak to a third day.
Though the digital token has trended sharply lower all year due to increased regulatory scrutiny and limited adoption of cryptocurrencies in general, some investors say Bitcoin’s drop today could be attributed in part to the broader market sell-off. US stocks on Wednesday had their worst decline since February, with the S&P 500 sliding to its lowest level since July.
“It’s just mirroring the weakness in US stock futures overnight,” said David Tawil, president of ProChain Capital, a crypto-focused fund. “If the stock market shows strength today, I’d expect recovery.”