Bitcoin and altcoins sold-off sharply on Aug. 19, leading technical traders to forecast a possible drop to new yearly lows.
Bitcoin (BTC) and most major altcoins witnessed a sharp sell-off on Aug. 19, but there does not seem to be a specific trigger for the sudden drop. The sharp fall resulted in liquidations of more than $551 million in the past 24 hours, according to data from Coinglass.
Barring a V-shaped bottom, other formations generally take time to complete as buyers and sellers try to gain the upper hand. This tends to cause several random volatile moves that may be an opportunity for short-term traders, but long-term investors should avoid getting sucked into the noise.
Daily cryptocurrency market performance. Source: Coin360
Glassnode data shows that investors who purchased Bitcoin in 2017 or earlier are just doing that by holding their positions. The percentage of Bitcoin supply dormant for at least five years hit a new all-time high of 24.351% on Aug. 18, suggesting that holders are not willing to sell in panic or for minor gains.
Could Bitcoin and most altcoins challenge their June lows or will the bulls buy the current dip? Let’s study the charts of the top-10 cryptocurrencies to find out.
Bitcoin’s major trend is down but the bulls are attempting to form a bottom. The price has been rising inside an ascending channel for the past few days. The failure of the bulls to push the price above the resistance line of the channel may have tempted short-term traders to book profits. That has pulled the price below the moving averages.
BTC/USDT daily chart. Source: TradingView
The BTC/USDT pair decline to the support line of the channel and when the price trades inside an ascending channel, traders usually attempt to buy the dips to the support line and sell near the resistance line.
Therefore, the likelihood of a bounce off the support line is high. If that happens, the buyers will try to push the pair above the moving averages. A break and close above the 20-day exponential moving average (EMA) ($23,265) could open the doors for a possible rally to the resistance line.
This positive view could invalidate if the price breaks and sustains below the channel. Such a move could open the doors for a possible drop to $18,626.
Ether (ETH) dipped below the 20-day EMA ($1,771) on Aug. 19, which is the first sign that the recovery may be losing steam. The important level to watch on the downside is $1,700 as it had acted as a strong support between Aug. 6 and 10.
ETH/USDT daily chart. Source: TradingView
If the price rebounds off $1,700 with strength, it will suggest that bulls are attempting to flip this level into support. The ETH/USDT pair could then rise to $1,960 and later to $2,030. A break above this level could indicate the resumption of the uptrend. The pair could then rally to the downtrend line.
Contrary to this assumption, if the price breaks and sustains below $1,700, it will suggest that traders who may have purchased at lower levels are aggressively closing their positions. That could pull the pair to the 50-day simple moving average (SMA) ($1,519).
BNB plummeted below the 20-day EMA ($304) on Aug. 17, indicating that the short-term traders may be booking profits. The decline continued further and the price slipped to the 50-day SMA ($272) on Aug. 19. This is an important level for the bulls to defend if they want to keep the recovery intact.
BNB/USDT daily chart. Source: TradingView
If the price turns up from the current level and rises above the 20-day EMA, the BNB/USDT pair could rise toward the overhead resistance at $338. That could form an inverse head and shoulders pattern, which will complete on a break and close above $338.
Conversely, if the price breaks below the 50-day SMA, the pair could slide to $240. Such a move will suggest that the pair may remain stuck inside a large range between $183 and $338 for some time.
The bulls failed to push Ripple (XRP) above the overhead resistance at $0.39 on Aug. 17, which suggests that bears continue to defend the level with vigor.
XRP/USDT daily chart. Source: TradingView
Usually, in a range, traders buy near the support and sell close to the resistance and that is what happened with the XRP/USDT pair.
The bulls may now wait for the price to drop near the support at $0.30 before buying. If the price rebounds off $0.30, it will indicate that the range-bound action may continue for a few more days.
The next directional move could start after buyers drive the price above $0.39 or bears sink the pair below $0.30. The price action inside a range is usually random and volatile. Hence, experienced traders generally wait for the breakout to happen before entering a position.
Cardano (ADA) broke below the 20-day EMA ($0.52) on Aug. 18, indicating that the bulls may have been hurrying to close their positions. This gave the bears a slight edge.
ADA/USDT daily chart. Source: TradingView
The sellers pressed on with their advantage on Aug. 19 and pulled the price below the 50-day SMA ($0.49). This increases the possibility that the ADA/USDT pair could decline to the crucial support at $0.40.
The bulls have defended this level on two previous occasions, hence the odds favor a bounce off it. If that happens, the pair could oscillate between $0.40 and $0.60 for some time. The bears will have to sink the pair below $0.40 to start the next leg of the downtrend.
Solana (SOL) bounced off the support line on Aug. 18 and the bulls tried to push the price above the 20-day EMA ($41). However, the bears defended the level successfully.
SOL/USDT daily chart. Source: TradingView
This exacerbated the selling on Aug. 19 and pulled the price below the 50-day SMA ($39). This invalidated the bullish ascending triangle pattern. The bears will now attempt to sink the SOL/USDT pair to $34.50.
If the price rebounds off $34.50, the pair could attempt a rally above the moving averages. If that happens, the pair could consolidate between $34.50 and $48 for some time. Conversely, a break below $34.50 could sink the pair to $31.
Dogecoin (DOGE) turned down and broke below the breakout level of $0.08 on Aug. 18. This was the first indication that the break above $0.08 on Aug. 14 may have been a dead cat bounce.
DOGE/USDT daily chart. Source: TradingView
The bears continued their selling and have pulled the price to the trendline of the ascending triangle pattern. A break below this level could invalidate the bullish setup and open the doors for a possible drop to $0.06. This level is likely to attract strong buying by the bulls.
Alternatively, if the price rebounds off the current level, it will suggest that the bulls are attempting to defend the trendline. The buyers will have to push the DOGE/USDT pair back above $0.09 to gain the upper hand.
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Polkadot (DOT) closed below the 20-day EMA ($8.46) on Aug. 17, which was the first indication that the break above $9 may have been a sucker’s rally. Sellers took advantage of the situation and pulled the price below the 50-day SMA ($7.75) on Aug. 19.
DOT/USDT daily chart. Source: TradingView
This opens the doors for a possible drop to the crucial support at $6. This level acted as a strong support on two previous occasions; hence, the bulls will again try to defend the level with all their might.
If the price rebounds off $6, the DOT/USDT pair could continue to trade inside a large range for a few days. The next strong move could start after bulls push the price above $10 or bears sink the pair below $6.
In a downtrend, strong rallies usually end up as bull traps and that is what happened with Shiba Inu (SHIB). The buyers could not sustain the price above $0.000017 on Aug. 17 and build upon the momentum. That may have resulted in profit-booking by the short-term traders.
SHIB/USDT daily chart. Source: TradingView
The bulls tried to resume the up-move on Aug. 16 but the bears held their ground. That aggravated the selling pressure and the bears pulled the price below $0.000014 on Aug. 18. The bears will try to solidify their position by sinking the price below the 50-day SMA ($0.000012).
To invalidate this bearish view, the bulls will have to push the price back above $0.000014. If they do that, it will suggest strong buying at lower levels and could clear the path for a possible rally to $0.000017. The SHIB/USDT pair could signal a trend change above $0.000018.
Avalanche (AVAX) could not sustain above the breakout level of $26.38 on Aug. 17, indicating that traders were rushing to the exit. The selling continued and the price broke below the 50-day SMA ($22.93) on Aug. 19.
AVAX/USDT daily chart. Source: TradingView
The bulls have to defend the support line or else the selling could intensify and the AVAX/USDT pair could decline to $16 and then to $13.71. A break and close below $13.71 could signal the start of the next leg of the downtrend.
Conversely, if the price rebounds off the support line, it will suggest that bulls are attempting to form a higher low. The buyers will have to push and sustain the price above $26.38 to gain the upper hand. Such a move will increase the likelihood of a break above $31.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Market data is provided by HitBTC exchange.