The world’s largest cryptocurrency broke down the long-term support level before settling around US $29,500 on Tuesday. It managed to briefly climb up but was sold off sharply by the sellers lined up just above US $30,000 level to dump their holdings.
As of press time, among Top 10 Big Caps, Bitcoin (BTC) is changing virtual hands at US $29,530, Ether (ETH) at US $1,768, ripple (XRP) at US $0.51, Binance Coin (BNB) US $263, cardano (ADA) at US $1.03, Dogecoin (DOGE) at US $0.16, ChainLink (Link) at US $13.51, UniSwap (UNI) at US $14.15, Polkadot (DOT) at US $10.69 and Stellar (XML) at US $0.20.
As already covered, the breach of US $30K level is a major blow for Bitcoin enthusiasts and will likely set a good base for an extended downside move due to the lack of a strong psychological barrier at the current level, on the back of prevailing downtrend.
Largely shaped by human emotional and behavioural response, psychological levels denote support and resistance lines at rounded-off numbers reflecting market sentiment and anchoring (a cognitive bias whereby an individual’s decisions are influenced by a reference point – As a buyer or seller, you think you will sell and exit the market if it falls below US $30,000 or US $25,000. You don’t usually come up with an arbitrary number like $27,836. This is especially important if you use auto or algorithmic trading).
In the short-term, traders and speculators are keeping an eye on bitcoin’s potential drop to around US $25,000 unless it gains upside momentum to stabilise above the US $30,000 level.
The world’s largest cryptocurrency has been in a downtrend trend since failing to hold an all-time high above US $60,000 in April.
The total market cap of Bitcoin plunged below US $550 billion this week, less than half of its once whopping US $1.2 trillion value.
On a domino effect, it has knocked down the total market value of cryptocurrencies to less than half of what it was near $2.5 trillion mark in April.
The entire cryptocurrency market has almost been closely moving in lockstep with bitcoin throughout the past weeks.
At the current levels, although most major coins are facing strong resistance to push higher as sellers have lined up to dump their holdings on any upside movement, there still is a window for positive traction if consolidation at the current levels persist and further losses are limited.
However, the current downward drift could be just a little taste of what has to come as risk averse corporate investors continue to bank profits and jump off the sinking ship, leaving retail traders holding the bag.
Over the past weeks, investors and traders have been growing increasingly nervous amid souring mood and negative outlook that the subdued trading may open up a long-lasting downward spiral.
An overview of trading volumes simply indicates subdued trading activity with slightly more sellers than buyers which has continued to provide headwind to the cryptocurrency market.
The important factor to note is that unlike previous dips there is no notable dip buying likely due to fears of lack of momentum and broad risk-off sentiment in the market.
Most margin providers have alerted customers about temporary margin changes on cryptocurrency instruments due to the “current market conditions” after a relative pickup in short (sell) positions as experienced traders move to get ahead of the broadly expected decline this week. It is not unusual for brokers and exchanges to warn customers about tightened margin rules when they brace for “elevated volatility” in the markets.