Turbulent times in the market, but a temporary reversal looks underway.
Wednesday saw bitcoin finally and conclusively breach its long-term support at $6k and, ultimately, $5,700 – the last line of defence. The resulting plunge was sudden and severe as traders raced each other to sell first. There’s little in the way of support for a long way down, so no one wanted to wait around to find the bottom. Eventually BTC bounced at $5,200 (Bitstamp).
The move above $6,500 was a fakeout (something that often happens with bitcoin), after which we returned to the established range and then broke down. It all happened very fast and many of those intending to short at $5,700 will have missed their chance.
The catalyst for all this seems to be the fork in Bitcoin Cash, as traders move large sums of money into and out of the currency via bitcoin and take their positions. BCH suffered a brutal selloff and the fork – which has now taken place – was surrounded by more FUD than is usual even for crypto. Craig Wright has been posting all kinds of crazy stuff to Twitter, essentially saying he will actively work towards the demise of BCH and BTC, if necessary: https://twitter.com/ProfFaustus. Read the memes and insults, and ask yourself: is this really the person who wrote the Bitcoin white paper and launched the whole crypto industry?
Wright has promised a hash war intended to destroy BCHABC – the rival BCash fork to his BCHSV – and stated that miners who support ABC with hashrate will be contributing to the crash of BTC, since he will be forced to sell BTC to pay for additional hash. Despite his claims and a short-lived rally in BCHSV futures, BCHSV is today trading down 40-50%, and a third of the price of BCHABC. So far, his posturing has come to nothing. Having boasted that SV was ahead, Wright now finds ABC 45 blocks ahead and moving away fast.
For now, BTC is monstrously oversold, down at 18 on the daily RSI. We’re due a short-term bounce at the very least, and yesterday’s huge doji candle signals reversal – whether that’s temporary or not can only be known in hindsight. We expect to test $5,700 and $6k again quickly, with that former support level now acting as resistance. Assuming we’re not in for lower lows – which is by no means certain – it would likely take a couple of goes to punch through $6k again. With the BCash fork out of the way, the uncertainty and external factors are at least receding.
Downwards, there’s not much in the way of historic support, since the run-up last year was so sudden. There’s the psychological $5k level, and good support at $3,500. Hopefully we won’t test that low, but there are no guarantees.
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