Bitcoin is feeling the pull of the gravity today.

The world’s largest cryptocurrency rose to new record highs yesterday, rallying to $7,848.31 on CoinDesk’s Bitcoin Price Index (BPI) before falling to a low of $7,058 today. As of writing, the bitcoin-US dollar (BTC/USD) exchange rate is trading at $7,253.50.

BTC began losing altitude soon after the markets were alerted that a controversial software update, known as Segwit2x, had officially been suspended. The software, which would have required a fork of the blockchain, had attracted a lot of attention in the media, and rightly so, as it could have led to chain split and the creation of free assets for BTC holders.

In this way, the BTC rally from the mid-Oct. low of $4,800 looks in part to have been fuelled by speculation that all BTC holders at the time of the “2x” hard fork would receive an equal amount of the newly created cryptocurrency – should a split have occurred.

Now that the hard fork has been called off, it’s safe to assume that bitcoin prices may fade in the short term.

However, as backed up by the investors’ comments on social media, the cancellation of 2x hard fork means less uncertainty going forward and that could bode well for the BTC in the long run. Still, prices could revisit sub-$7,000 levels in the meanwhile, as money rotates out of BTC and into alternative currencies.

The price analysis points to a potential bearish reversal pattern.

Bitcoin chart

A bearish price-relative strength index (RSI) divergence would be confirmed if the today’s candle ends with losses (red). A bearish divergence occurs when the price forms higher highs and the RSI forms lower highs.

Confirmation of the bearish divergence would mean the rally from September lows below $3,000 has formed a temporary top above $7,800. Prices could then revisit $6,200 (support offered by the trend line sloping upwards from the Sep.15 low and Oct. 5 low.

Furthermore, the shape of the yesterday’s candle is somewhat bearish too. Prices clocked record highs above $7,800 yesterday, but ended the day well below the previous high of $7,630. The price action indicates, therefore, bull market exhaustion.

4-hour chart

The bearish price RSI is more clearly visible on the 4-hour time frame.

Immediate support is seen at $6,900 (Nov. 6 low), although it is likely to be breached, given the bearish price-RSI divergence.

View

BTC could take out support at $6,900 and drop towards the rising trend line support of $6,200.

On the higher side, only a move above $7,500 would revive the bullish view.

A potential rebound from $6,900 to $7,200 would be a call for caution for the aggressive bears.

Fishing line image via Shutterstock