Why could BCH drop 23%?

• Bitcoin Cash price is finding resistance at the 50-week EMA around $350, signaling an imminent decline.
• On-chain data shows that BCH’s OI-weighted funding rate is negative, suggesting a bearish trend.
• A weekly candlestick close above $378 would invalidate the bearish thesis.

Bitcoin Cash (BCH) faced several rejections from the 50-week exponential moving average (EMA) around $350.2. This week, it fell 9% to trade at $324.2 on Thursday. On-chain data highlights the continuation of the downward trend as BCH’s OI-weighted funding rate is negative.

Bitcoin Cash is set for a downleg if it closes below the key support level

Bitcoin Cash price faced several rejections from the 50-week exponential moving average (EMA) of around $350.2. This week, it fell 9% to trade at $324.2 on Thursday and is nearing the support zone, which ranges from $299.7 to $280.6. This area is significant for weekly and monthly support.

If BCH closes below $280.6 and breaks below the uptrend line (drawn by connecting multiple early June 2023 lows), it could crash 23% to retest the weekly low of $210.1 from December 11, 2023.

The weekly chart’s Relative Strength Index (RSI) and Awesome Oscillator (AO) have dropped below their respective neutral levels of 50 and zero. This suggests continued momentum favoring the bears, which may lead to further declines in the price of Bitcoin Cash.

BCH/USDT Weekly Chart

Coinglass’ OI-weighted funding ratio data is a crucial metric for traders and analysts to gauge market sentiment and predict future price movements. This measure is based on funding rates in futures contracts, weighted by their open interest. A positive rate (longs pay shorts) usually signals bullish sentiment, as longs offset shorts. Conversely, a negative rate (shorts pay longs) indicates bearish sentiment, with shorts offsetting longs.

In the case of BCH, this metric stands at -0.026%, reflecting a negative rate and indicating that shorts are paying longs. This scenario often signifies bearish sentiment in the market, suggesting potential downward pressure on the price of Bitcoin Cash.

BCH OI Weighted Funding Rate Chart

However, if BCH breaks above the 50-week EMA and closes above the weekly resistance level of $378, it could indicate that bullish sentiment could return. Such a development could trigger a 19% rally in Bitcoin Cash price to revisit its July 29 weekly high of $459.2.