The rebound in the bitcoin-U.S. dollar (BTC/USD) exchange rate appears to be stalling out.

After rising from a recent low of $2,980 earlier this week, bitcoin is again trading below $4,000, a development that raises doubts as to whether the rally will continue. As per CoinMarketCap, the cryptocurrency was trading at $3,850 at press time – down 1.68 percent in the last 24 hours.

Week-on-week, BTC is up 19 percent. On a monthly basis, BTC is down 3.7 percent.

However, assumptions that China's crypto trading crackdown will not have a long-term impact seem to have waned. This is evident from the price action analysis, which points to bullish exhaustion around $4,000 and a lack of substance in the rally from $2,980.

This runs counter to the response to a knee-jerk sell-off in bitcoin earlier this week, when, following China's crackdown on cryptocurrency trading, the market quickly saw steep gains.

Building on that momentum, on September 15, bitcoin staged a solid rebound from the 100-day moving average levels in the wake of an oversold relative strength index.

But while a similar price action in July had yielded a record rally to $5,000 levels, September may be unlikely to offer a case of history repeated.

The chart reveals a descending broadening wedge formation – a megaphone-shaped pattern with lower peaks and lower valleys. The breakout direction is upward more than 70 percent of the time.

However, in the bitcoin's case, the odds of an upside breakout look weak, if the lack of buying pressure/lack of substance as shown by the average true range (ATR) indicator is taken into account.

ATR is a volatility indicator that reveals the degree of interest or disinterest in a move. A bullish reversal with an increase in ATR shows strong buying pressure/high interest and adds credence to the reversal.

Bitcoin's reversal from $2,908 has been accompanied by a drop in the ATR, however, which indicates lack of enthusiasm in the move.

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