Bitcoin fell to a 5.5-week low of $7,335 on the BPI yesterday, a drop linked to reports that Twitter is planning to ban cryptocurrency ads. In recent weeks, both Facebook and Google have announced similar bans on advertising content related to crypto exchanges and token sales.
However, the drop to a multi-week low was short-lived and the cryptocurrency quickly regained poise - possibly due to a bullish relative strength index (RSI) divergence - clocking a high of $8,435 earlier today.
Further, the Financial Stability Board (FSB), which coordinates financial regulation for the G20 economies, yesterday rejected calls for stricter regulation of cryptocurrencies, according to a Reuters report - news that may have played a part in boosting BTC prices.
Looking ahead to later in the day, BTC could well extend the corrective rally towards the $9,000 mark.
As of writing, the cryptocurrency is trading at $8,154, as per CoinDesk's Bitcoin Price Index (BPI). The global average price, as calculated by CoinMarketCap, is seen at $8,219 - up 6.5 percent on a 24-hour basis.
A high volume upside break of the falling wedge (bullish reversal pattern) would add credence to the bullish price-RSI divergence and open the doors for a rally to $9,000 (prices as per Bitfinex).
On the other hand, a repeated failure to hold above the resistance at $8,342 (marked by a circle) would shift attention back to $7,800.
The erratic rise from $7,240 (yesterday's low) to $8,467 (today's high) suggests that a temporary low is in place. However, only a close today (as per UTC) above the 10-day moving average (currently seen at $8,566) could yield a sideways to positive action for a couple of days.
'Death cross' on the way?
The daily chart also shows the 50-day MA is likely to cut the 200-day MA from above in the next few days. The bearish crossover is popularly known as a 'death cross' and according to a few strategists, it could end up pushing bitcoin down to as low as $2,800.
However, it is worth noting that long-term moving average crossovers are not very reliable indicators, as a major chunk of the sell-off has already run its course by the time the crossover actually occurs. Hence, a death cross tends to work as a contrary indicator in the short-run.
That said, the long-term view remains bearish as long as bitcoin trades below $11,700.
Last week's sell-off marked a negative follow-through to previous week's bearish 'outside-week' candle, meaning the bears are in control and could take prices as low as $6,456 (weekly 50-MA).
A minor rally to $9,000 cannot be ruled out in the near-term, but gains are likely to be capped around the descending (biased bearish) 10-week MA of $9,710.
Looking further ahead, bitcoin looks set for a drop to at least the weekly 50-MA, currently seen at $6,456. Further sell-off appears unlikely as a 'death cross' (lagging indicator) would be confirmed by then, indicating a short-term bottom has been made.
Only a weekly close above $11,700 would signal the beginning of a fresh bull run towards record highs.