Cryptocurrencies across the board have slipped on Friday but without falling through recent lows, as digital asset enthusiasts cling to hopes that it is a temporary dip and a nascent recovery can regain its momentum.
Bitcoin has been hovering around $40,000 , the highest point since June as a rush for short-covering intensified the relief recovery apparently sparked by speculation over Amazon.com Inc.’s involvement in the crypto industry.
It was a job posting from the retail giant seeking an executive to develop its “digital currency and blockchain strategy” stirred questions among analysts over whether the move could eventually lead to Amazon accepting Bitcoin as a method of payment.
Amazon.com, however, denied rumours this week with “this is not true”.
The largest digital coin fell to $37,000 with other digital currencies also retreating. It subsequently managed recover the ground and hold $40,000 on multiple occasions. However, all breakouts have been sharply sold off by the sellers lined up around $41,000 who believe holding US $45,000 might not be an easy feat in the short term due to lack of any fundamental support.
This is in line with the overall market expectation that the current rebound to US $40,000 may not be sustainable as nothing has changed since bitcoin trading just around $29,000 days ago.
The current pullback is happening on the back of a relative pickup in risk aversion and underlying market sentiment, especially rising concerns over Covid-19 and its potential long impact on the economy.
Note a pullback should not be confused with a reversal as a pullback is a temporary pause or dip which might actually quickly turn into an upward momentum while a reversal is a more long-term drop against the otherwise prevailing trend. It happens because bargain hunters usually see pullbacks as an opportunity to top up their wallets and support the price upwards. Some indicators, including moving averages and pivot points can be used to decide whether a pullback is actually turning into a reversal.
It is important to note that the range in price swings at the moment shows any possible pullback would likely be limited in the magnitude due to strong support under the current levels, especially further down at $37,000 and $34,000. There is even a much stronger well-tested support just under $30,000.
The current capped upward traction due subdued buy orders indicates further market-wide losses shouldn’t be ruled out over the coming weekend.
Despite the downside risks, positive traction might be possible if there comes further significant improvement to increase risk appetite.