Bitcoin, as broadly expected by traders, plunged near 7% to under US $30,000 for the first time since Jun. 22 pulling down the entire market which lost a total of US $104 billion.
The entire market has been on a cliff edge trading within a tight range over the past weeks in lockstep with bitcoin with gradual downtrend in play.
Ether lost over 8% to hit US $1,730 support, highlighting a fragile altcoin environment still at the mercy of Bitcoin sentiment.
As of press time, in Top 10 big caps, Bitcoin (BTC) is changing virtual hands at US $29,630, Ether (ETH) at US $1,738, ripple (XRP) at US $0.52, Binance Coin (BNB) US $263, cardano (ADA) at US $1.04, Dogecoin (DOGE) at US $0.16, ChainLink (Link) at US $13.49, UniSwap (UNI) at US $14.65, Polkadot (DOT) at US $10.59 and Stellar (XML) at US $0.19.
The dive is a major blow for Bitcoin fans and is expected to, unless bounces up quickly, set a good base for an extended downside move as explained earlier due to the breach of sustained psychological barrier.
Why are psychological levels significant?
Numbers have mattered to humans ever since the dawn of civilization, though some more than other others. Psychological levels in terms of support and resistance are typically something that is “easy to remember,” such as a rounded-off number.
Largely shaped by human emotion and psychology, these rounded-off number are based on market sentiment and anchoring (a cognitive bias whereby an individual’s decisions are influenced by a particular reference point – For example, you think you will sell and exit the market if it falls below US $30,000. You don’t usually come up with an arbitrary number like $29,837. This is especially important if you use auto or algorithmic trading).
Over the past months, analysts have been divided on what happens next if bitcoin breaks the US $30,000 mark. Some believe it would trigger more dip buying and eventually lifting the price toward $34,000-$40,000 while others point to lack of demand due to low participation of the institutional investors.
For long-term investors who look at fundamentals rather than technicals, it may not be a big worry. Significant pullbacks have happened before in the cryptocurrency market, with bitcoin falling about 80% from its late 2017 highs at one point. Long-term crypto investors know well the space is and will continue to be volatile. That is actually the reason they are there.
In the short-term, traders and speculators are keeping an eye on US $27,000 as any upside momentum is capped at US $30,000 level. This might simply means it is not a matter of “if” but “when” it will break this level down.
A break could exacerbate a quick fall back towards mid-US $20,000 – another psychological level as broader sentiment appears to be souring. Altcoins would suffer similar percentage-point declines as they have done so far.
So far, the total market value of cryptocurrencies has dwindled to less than half of what it was near $2.5 trillion mark in April.
The total market cap of Bitcoin plunged below US $650 billion on Monday, just half of its once whopping US $1.2 trillion value.
On the positive side, even with the recent downturn, the cryptocurrency is still up more than 200% over the past 12 months. Perhaps, it is not the end of the world?