Bitcoin’s daily candle closed at below $6,000 for the first time this year. Analysts are calling the bottom around $4,500-$5,000, though of course, we can never know except in hindsight.
We’ve spent most of the last week bumping along the $6,000 line, with a judder on Sunday that saw the price of bitcoin fall deeply below that level before a surprise recovery to close the day above $6k once more – possibly helped by knowledge that newly-created Tethers were about to be deployed into the market.
But that wasn’t enough to instil confidence into a very fragile situation, and on Thursday night the almost inevitable happened with a fall below that all-important support level. Sunday’s low was $5,780 (Bitstamp) and the price has already dropped a few dollars below that, so there’s little consolation here for bulls.
It also bears repeating here that volumes are not high, the implication being that these moves lack conviction. It’s more of a drift than a crash, which is what we need to resolve this bear trend: the classic sharp ‘capitulation’ fall driven by panic selling, followed by a hard bounce as smarter traders pick up coins they firmly believe are under-priced.
The fact that volumes are still low indicates we’re not at that point yet, and many so-called experts are nailing their colours to the mast with predictions in the $5,000 zone or a little below.
And here, we need extra caution. Because the market exists to make fools of as many people as possible, and bitcoin in particular has a habit of confounding expectations.
When ‘everyone’ thinks the price is going to fall, there is no one left to sell and so the opposite happens. Alternatively, those traders may find themselves caught out because they have telegraphed their move to the wider market (including whales with the firepower to manipulate the market), and found themselves on the end of further falls beyond their target buy-in price.
Crypto isn’t dead, it’s just in pain right now. Good luck, trade smart, and position carefully for the future.
Update: this report was written yesterday, before the $500 spike in bitcoin prices that occurred late last night. This is exactly the reason for caution: when ‘everyone’ think prices are heading lower, that’s the time when the market is ready to liquidate short sellers by surprising them with a move up.
Right now we don’t know whether this is part of a longer-term move or just a flash in the pan. Volumes still aren’t high enough for any degree of confidence. Watch and wait!
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