At press time, bitcoin – the number one cryptocurrency by market cap – is back above the $8,000 mark following a nasty scare yesterday that saw it fall into the $7,000 range once again.
Bitcoin Is Moving Up Again
Many analysts immediately took to social media and other platforms to explain the reasoning behind bitcoin’s sudden, if short-lived, demise. Jeff Dorman, chief investment officer of the asset management firm Arca, explained:
The move lower is less about the magnitude and more about the correlation and direction. We’re hearing that the broad-based selling is being driven more by market makers and those that are short pushing the market lower, rather than driven by long unwinds or selling. With volumes still quite low relative to this summer, shorts are incentivized to keep pushing prices lower until they hit resistance.
Some believe that the price decline occurred for technical reasons. Joe DiPasquale, CEO of the cryptocurrency hedge fund Bit Bull Capital, says that the industry is still suffering heavily from the recent rejection of the Bitwise bitcoin exchange-traded fund (ETF). For the most part, this was the final proposal in play, and now that it’s been turned down, many enthusiasts and analysts believe it will take time for the crypto space to get back on its feet.
He explains:
We believe the current bitcoin price action is technical in nature. The price broke down from a descending triangle last month and has since continued to test the key support at $7,750. There was some relief ahead of the Bitwise ETF decision last week, but the [Securities and Exchange Commission] SEC’s rejection cut the surge short, which, accompanied by declining volumes, has brought BTC back to the pre-ETF anticipation, consolidation range. We expect bears to once again try and break the $7,750 support, which in the absence of market catalysts, has the potential to clear the way for a drop to $6,000.
People Aren’t Buying Enough
Jon Pearlstone, who publishes the cryptocurrency newsletter Crypto Patterns, says that bitcoin’s price is likely down because people aren’t buying enough. Some of the hype and hoopla surrounding BTC has ultimately waned, and people are concentrating more on selling than purchasing new units. He explains:
Bitcoin has been in a consolidation pattern around $8,000 since late September when price broke key support at $9,500. There was no buying follow through last week when price spiked above $8,500 and that usually leads to a retest of the bottom of the consolidation pattern (around $7,700) which is what looks like is happening now. Volume is higher, but there are no signs of a real breakdown yet. If we see continued selling, the target for the current bearish pattern is the $6,500 range and if current support holds, the bulls next target is a retest of the breakdown at $9,500.
