It has been two months since Bitcoin’s rally started. Since then the price has more than doubled reaching an all time high yesterday of $1892 on Bitstamp. Today we are seeing the first major pullback in the past few weeks which sent price plummeting over $100 in a matter of hours. One possible explanation to the drop, is James Comey’s – ex-FBI Chief – statements that Virtual Currencies hinder criminal investigations.

This recent statement reminded people that Bitcoin is still a threat to law enforcement and its use is still common in criminal organizations. Compared to more traditional payment methods like PayPal, or Bank accounts Bitcoin accounts can exist without linking any personal information. While the currency itself isn’t truly anonymous, its nature makes for an easier and more undetectable way to transfer money. In an appearance days before he was fired, Comey said:

“Some of our criminal investigators face the challenge of identifying online pedophiles who hide their crimes and identities behind layers of anonymizing technologies, or drug traffickers who use virtual currencies to obscure their transactions.”

Were these statements by Comey exactly what the bears were waiting for?  Reminding the public that Bitcoin is used by drug traffickers and pedophiles is a sure way to create negative pressure in the market. After the announcement, Bitcon’s price took a sharp turn and dropped over 5%.

Taking a look at Bitcoin’s RSI we can see that it has almost touched the 30 level, meaning the market is becoming oversold. That means that the value of the market is slightly lower than the actual value. Such a drastic shift in RSI is often a reaction to a panic sell, which definitely occurred. In an oversold market, the price is expected to rebound, so keeping a close eye on the RSI might be a good idea to gauge if Bitcoin will bounce back or keep dropping.

Furthermore, if the price remains fairly steady between the $1750 and the $1800 levels for the next day or two, a head and shoulders formation will form. This will only make a trend reversal more likely. However, if the price bounces back to the $1850 levels, the latest panic sell was simply a test to shake out weak hands.

Moreover, the SEC will decide on Bitcoin’s ETF for a second time by May 15th. If the decision is negative, expect the price to drop sharply just like it did two months ago. However, in the unlikely scenario that the SEC will approve the appealed application, Bitcoin’s price may reach $2000 in no time.

Dislaimer: This is not trading advice, this article is for educational purposes only. If you liked this article, follow us on Twitter @themerklenews and make sure to subscribe to our newsletter to receive the latest bitcoin, cryptocurrency, and technology news.