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Bitcoin has dropped more than 25 percent in the third quarter, neutralizing the bullish setup on the monthly chart.

With the weekly and the three-day charts biased bearish, the cryptocurrency risks falling to $7,500 in the short-term. A violation there would expose the next major support, currently at $7,070.

A corrective bounce may be seen before an extended sell-off to $7,500-$7,070, as the 4-hour chart is reporting a bullish divergence of the relative strength index.

A break above July’s low of $9,049 is needed to invalidate the bearish setup on the long duration charts.

Bitcoin (BTC) is again flashing red, having hit a 3.5-month low earlier today and is on track to post the first quarterly loss of 2019.

The top cryptocurrency by market capitalization fell to $7,715 at 04:50 UTC today – a level last seen on June 11 – and is currently changing hands at $7,980 on Bitstamp, representing 2 percent losses on a 24-hour basis.

More importantly, BTC is currently down more than 25 percent from July 1’s opening price of $10,759. This is the first quarterly loss since the final three months of 2018.

Back then, the cryptocurrency had dropped by 44 percent, as seen in the chart below.

Bitcoin’s two-quarter winning run is set to end with a double-digit price drop.

The 27 percent slide witnessed in the July-September period is the second-biggest third quarter loss on record, the first being the 55.78 percent drop registered in the third quarter of 2011.

Prices rallied 10.9 percent and 162.69 percent in the first and second quarter, respectively.

The long-term technical charts had turned bullish following the second quarter’s triple digit price rise and many observers were convinced that BTC may see a brief correction in the third quarter before challenging record highs near $20,000 in the final thee months of 2019.

The cryptocurrency did see a pullback to $9,100 in mid-July, having hit a high of $13,880 at the end of June and traded largely in a sideways manner around $10,000 in the following eight weeks.

With non-price metrics like hash rate hitting record highs, BTC was widely expected to chart a strong bounce from $10,000. Instead, the cryptocurrency dived below the psychological support last week and hit lows below $8,000, weakening the long-term bullish case, as seen the charts below.

Monthly chart

BTC created consecutive inside bar candlesticks in July and August, signaling indecision in the market place or consolidation.

September’s red candle marks a bearish follow-through to the consolidation. Essentially, the sellers have come out victorious in a tug of war with the bulls.

The bearish inside bar reversal would be confirmed if prices close today (UTC) below $9,049 – the low of the first inside bar (July). With BTC currently trading at lows below $8,000, a bearish close is pretty much confirmed.

The latest monthly candle has poured cold water over the optimism generated by April’s falling channel breakout. Moreover, a similar breakout in October 2015 had paved the way for a solid two-year bull run.

The bearish outlook would be invalidated if and when prices rise above $9,049.

Weekly and 3-day charts

BTC closed well below $9,533 on Sunday, confirming a double top breakdown on the weekly line chart (above left).

The breakdown has opened the doors for $7,500 (target as per the measured move method). Supporting the bearish case is the below-50 print on the relative strength index (RSI).

Meanwhile, the three-day chart (above right) indicators are also reporting bearish conditions. For instance, the RSI is hovering below 50 and the 5- and 10-candle MAs are trending south.

Further, the 5- and 50-candle MAs have produced a bearish crossover and the 10-candle MA is about to cross below the 50-candle MA.

With odds stacked in favor of the bears, a drop to the 200-candle MA, currently flatlined at $7,070, looks likely.

Daily and 4-hour charts

BTC failed to take out the 200-day MA on Saturday, as expected, and fell back to 3.5-month lows earlier today.

Essentially, BTC created a lower high at the key MA, reinforcing the bearish view. The daily chart RSI continues to report oversold conditions, but would gain credence if and when signs of seller exhaustion emerge on the price chart.

However, on the 4-hour chart, the indicator is charting higher lows, contradicting lower lows on price. That bullish divergence indicates a corrective bounce could be seen before the drop to $7,500-$7,070, as suggested by the long duration charts.

Corrective rallies, if any, will likely face stiff resistance of the 200-day MA at $8,415.

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin image via CoinDesk Archives; charts by Trading View