By CCN: In the past several hours, the bitcoin price has dropped from around $8,500 to $7,732, by nearly 14% against the U.S. dollar.
The bitcoin price has dropped by nearly 14 percent in the past 24 hours against the U.S. dollar (source: coinmarketcap.com)
A pullback for bitcoin was generally anticipated by technical analysts following its 130 percent year-to-date gain.
Traders were taken aback by the magnitude of the drop of the dominant crypto asset in a short time frame and if the asset does not demonstrate a speedy recovery, several technical analysts forsee bitcoin testing support levels in the $7,100 to $7,300 range.
Why bitcoin price fell and what it would need to rebound
Some investors have speculated that the abrupt drop in the bitcoin price was caused by manipulation by whales or investors holding large amounts of bitcoin in the tune of hundreds of millions of dollars.
“About 20-30 mins before the dump, a whale moved 25k BTC (worth $215M) to Coinbase. About an hour after the dump, a whale moved 14k BTC (worth $112M) from Coinbase to another wallet,” one user on Reddit wrote.
It is possible that a big sell order may have triggered the downward movement of bitcoin and the rest of the crypto market but considering that the volume of the BTC-USD pair on Coinbase is estimated to be less than $215 million, it would be far-fetching to claim that it was a clear instance of manipulation.
Doji top on weekly chart begins correction. $BTC pic.twitter.com/9L9YCZbrP8
— Peter Brandt (@PeterLBrandt) June 4, 2019
A large sell order on major exchanges fueled with the breach of key support levels are likely to have contributed to the drop.
Depending on the near-term performance of bitcoin, cryptocurrency analyst Josh Rager stated that if the bitcoin price struggles to maintain its momentum in the high $7,000 region, there exists a strong possibility of it experiencing a bigger pullback.
He said:
Bitcoin continues to push down quite aggressively and would like to see a move above $7824 and hold Eyeing that previous CME futures gap that wasn’t explored at $7175 If Bulls don’t step in, I believe the price is heading that way.
People have asked if that was short term sell off and the price is heading back up. Due to the amount of volume, it’s more likely price has short term relief that can last hours or days before another push down to retest support Price action isn’t a straight line.
Similarly, traders like Cred have emphasized $8,200 as a crucial level for bitcoin to claim and the failure to remain above it could result in an extended pullback.
A pullback may be healthy
Historically, at least in the past four years, the bitcoin price has tended to record 30 percent pullbacks on average following every extended rally.
The valuation of the crypto market dropped by nearly $20 billion in the past week (source: coinmarketcap.com)
A 30 percent pullback from $9,000 would be a drop to around $6,400, which technical analysts generally do not see based on the momentum of bitcoin in recent weeks.
However, considering that bitcoin has often recorded major pullbacks and rebounded from short-term drops to achieve record highs, a pullback may be healthy for bitcoin and the crypto market.
“I’d be a lot more confident in the markets after a hard reset. Price action is starting to feel quite lethargic. I’m not strong bearish, but I’m also not feeling particularly bullish up here. It’s not a bad time to risk off from this rally,” one trader added.
This indicates that the stance of traders have become cautiously optimistic to cautiously bearish following the overnight drop of bitcoin.
