Bitcoin Drops 3% as US-Iran Hostilities Escalate

The Bitcoin price has refused to break and hold above the $64K horizontal resistance level. Middle East conflict escalation could be the cause of the recent dip below $63K. Could the dip worsen, or will major support structures hold?

Bulls fail to break $64K

Source: TradingView

A sharp decline under $63K has the $BTC price finding support at the 200 SMA. A further price fall would then bring the major support of the bull market trendline into play. 

Could this be the full extent of the dip for now? The 4-hour Stochastic RSI indicator lines are about to bottom, so there could be a bounce, or at least some sideways price action for a while. That said, when the U.S. stock market opens later there could be some more downward pressure feeding through into Bitcoin. This remains to be seen.

One major area of concern for the bulls is that a higher high was still not made, in spite of the repeated attempts to break above the $64K resistance over the weekend.

Bearish M pattern developing?

Source: TradingView

Moving out into the daily time frame there is the possibility that an M pattern may be developing, with the bull market trendline forming the neckline. If a knock-on effect from the U.S. stock market does take place, the $BTC price could fall down to the bull market trendline and complete the pattern. For the M pattern to then play out, a confirmed break below the trendline would be next. The measured downside move for the pattern would be to just under $59K.

Another factor potentially pushing the price down is the descent of the 50-day SMA. As this moving average comes down, it is likely to provide resistance to an upside move in the price.

Finally, a double dip in the daily Stochastic RSI may be about to occur. These often lead to a decent period of downside price action, as was previously seen in mid-June through to the beginning of July.

Weekly time frame looking bullish

Source: TradingView

The much higher time frame of the weekly is painting a more bullish picture. While uncertainty reigns in the short-term time frames, here in the weekly all is still relatively serene. The $BTC price continues to hold the bull market trendline and the 200-week SMA. As long as this remains the case, the bears will be worrying that the bear market may have found a bottom.

One significant sign for this is a cross-up of the Stochastic RSI indicator lines from the critical 20.00 level. If these indicators keep moving up, upside price momentum will be signalled, meaning that this could well be a sign that the tide is turning and that the bull market is beginning.

On the other hand, if a war-inspired black swan rears its ugly head, a final collapse into the bottom of the bear market could be a bleak alternative.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.