Bitcoin Drops 20%
As we round out another week it’s time once again to take a look at the winners and losers. Chatting with traders it seems there have been plenty of attention grabbing trades this week, however the one that is drawing the most focus is the collapse in Bitcoin. The current marmite of financial trading (either you love it or hate it), the nearly 20% drop in Bitcoin this week was the stuff of dreams for bears, the stuff of dreams for bulls and for those that missed out on the move? Just plain old annoying! So, let’s take a look at what caused the move and as always, if you caught it? Well done! If you didn’t? there’s always next week!
What Caused the Move?
El Salvador Makes Bitcoin Legal Tender
It’s been an historic week for the Bitcoin, the leading cryptocurrency. Monday marked the day that the South American country of El Salvador officially approved Bitcoin as legal tender nationwide, meaning it can be used as payment for any goods or services in the country. Along with the announcement, each citizen was minted with $30 worth of the cryptocurrency. While this is indeed a momentous step and marks further advancement for Bitcoin in terms of moving into the mainstream, the day also marked a more than 17% drop (almost 2000 points).
Exchange Outages
The crash, however, has been mainly attributed to technical factors as two key exchanges (Bitfinix and Coinbase) experienced outages on the day which disrupted price action. However, some crypto commentators are suggesting that the sell off was a case of “buy the rumour, sell the news” over El Salvador’s announcement. Because the announcement was well price in, some players are likely to have traded the rally leading up to the announcement, including the government of El Salvador which bought $30 million worth) and then cashed out as the news was announced.
The crypto market is now heavily divided between those who believe that this pull back is merely a correction within a longer-term bull trend and those who believe that the current peak now risks forming a lower high against the all time highs, paving the way for an ongoing reversal lower. So, that’s the fundamental backdrop, now let’s look at the technical view.
Technical Views
Bitcoin
The selloff in Bictoin saw price reversing lower from a retest of the broken bull channel and the 52930 resistance level. The decline took out several support levels on the way down but eventually found support into the 43895 level which underpins the market for now. However, as yet, the bounce off the lows has been capped by the 47065 level and with indicators bearish, the risks is of further losses while below this level.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.