Bitcoin drops to lowest since February
Fawad Razaqzada June 13, 2018 7:46 AM
The price of Bitcoin has fallen below $6500 to reach its lowest level since February 6. That was a day when it found significant support from around the $6000 mark which led to an eventual recovery to almost $12000 later on in the month. But it doesn’t feel like such a sudden rally will be on the cards again this time. Bitcoin has been trending lower along with other crypto currencies since early March and no end to the bear trend appears to be in sight. Sentiment on digital currencies turned sour after the bubble burst late last year, leading to significant price drops. A clamp down on crypto exchanges, ICO advertising ban, and threats of regulation undermined investor confidence. Sentiment hasn’t been helped by a series of hacks either, the latest victim of which being South Korean exchange Coinrail which affected a number of lesser-known coins such as Pundi X. Other factors that may have undermined crytos include diminished geopolitical risks, reducing the appeal of safe haven assets across the board.
It is said that success breeds success. Well, the opposite is also true. The sustained fall in the price of Bitcoin and other cryptos has caused sentiment to turn bearish on digital currencies with many would-be buyers put off by the downward-trending prices. Most participants in this group are unlikely to step in unless they are confident that the downward trend has ended. Support from this source is therefore missing for the time being. The fear of missing out (FOMO) has no longer been there to justify buying at ridiculously high levels. Also helping to exacerbate the sell-off is long-side liquidation, causing further selling pressure. Undoubtedly many long-term investors missed out on the opportunity to close at or near the highs and some are now forced to get out with whatever profit is available to them.
Bitcoin will bottom out eventually, but it could go down a lot or a little further in the meantime. No one will be able to predict precisely when and at what level the bottom might occur due to the almost unlimited number of variables that affect prices of cryptos. But when prices do bottom out, we will see a big rally and a break in market structure of lower lows and lower highs. Once that structure is broken only then can long-term investors have legitimate reason to step back in.
The focus for shorter-term minded speculators is clearly looking for bearish setups than bullish as things stand. Participation on the short-side is undoubtedly growing as more and more support levels break down. With BTC/USD being below the 21, 50 and 200 day moving averages, this is objectively telling us that the trend is indeed bearish. We have included a few potential support and resistance levels on the chart.
Source: TradingView.com and FOREX.com
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