Bitcoin risks a further sell-off if the bulls’ defense of $3,700 fails to produce quick recovery.
The leading cryptocurrency by market capitalization created a big bearish outside reversal candle on Feb. 24, weakening the bullish case put forward by last week’s high-volume breakout above $3,800.
The sell-off was likely driven by the unwinding of long positions (profit taking), as the notional value of short positions fell 12 percent to 11-month lows, according to Bitfinex. Notably, the long-short ratio is still holding near the high of 1.5 seen earlier this month, signaling bullish market sentiment. Further, the bullish higher low of $3,550 set on Feb. 17 is intact.
Therefore, the path of least resistance is still to the higher side. So far, however, the bulls have not taken advantage of better entry levels offered by Sunday’s price drop, leaving the cryptocurrency directionless around $3,800.