Bitcoin Cash Price Analysis: BCH Correction Just Starting, Poised For Another 27% Drop
- Bitcoin Cash price 30% recovery comes to a sudden stop at $570 after technicals hit their elastic limit.
- A double top pattern on the daily chart points at colossal correction toward the primary support at $385.
- As shown by IntoTheBlock’s on-chain metrics, reduced network activity is a bearish signal likely to hinder recovery.
Bitcoin Cash has been caught up in a tussle between the bears and the bulls, and the situation is not different from the rest of the cryptocurrency market. The gains accrued last week and over the weekend are gradually being slashed. Perhaps investors are taking profits amid skepticism of the newly found momentum holding in the coming days or weeks.
Following a 30% recovery from $385, Bitcoin Cash rallied to close July around $570. The V-shaped recovery seems to have achieved its goal before being exhausted. Hence a correction ensued, sending BCH to $500.
Bitcoin Cash Price Bows Down Amid New Bearish Assault
In the wake of the rejection at $570, BCH affirmed the support at $500. The token is exchanging hands at $530 at the time of writing amid rising overhead pressure.
According to the Relative Strength Index (RSI) on the daily chart, bears are mainly in control. This follows the RSI’s retreat from a July top at 66. Stretching to the midline and perhaps lower will accentuate the bears’ grip on the price.
BCH/USD daily chart
As Bitcoin Cash rallied to $570, a double-top pattern appeared as observed on the same four-hour chart. This extremely bearish technical reversal pattern that forms after an asset hits a higher price point a couple of times without cracking through. Note that there is usually a moderate price drop between the peaks, such as BCH’s recent drop to $385.
The double-top pattern is confirmed in technical analysis when the asset drops under a support level equal to the low between the preceding two highs. Identification of a crucial support level helps to avoid failed double-top patterns. Meanwhile, if this pattern is verified, a breakdown accompanied by increased volume may trim Bitcoin Cash’s accrued gains.
Dwindling Network Activity Challenges Bitcoin Cash Recovery
IntoTheBlock’s “Daily Active Addresses” metric highlights a gradual drop in the number of newly created addresses on the BCH network. Realize that the addresses joining the network for the first time topped out at $68,000 On July 27 but had dropped to $61,000 on August 2.
Bitcoin Cash Network Activity
Similarly, the number of addresses interacting on the protocol has also decreased to 100,000, from a 30-day high of 135,000. If these metrics continue to drop, we expect Bitcoin Cash to fall in tandem. Note that bulls have an uphill task sustaining an uptrend amid dwindling network activity.