Over the past week, the stock markets took a considerable dive to the south following an announcement from the Fed that the fiscal outlook for the US over the next few years looks more unfavorable than many had previously believed.
In response to the drastic market devaluation which happened in a matter of hours, bitcoin and nearly all other cryptocurrencies dropped in value as well. It means once again BTC is swinging in the same directions as stock and FX markets.
However, bitcoin is still trading at nearly 30% higher than it was at the start of the year.
Bitcoin is currently trading between $9300 and $9500 and has been trading sideways since that massive drop on June 4 when prices were just shy of the $10,000 mark.
The current price range that bitcoin is trading within is a very familiar range for and it is one that has seen many support and resistance levels over the past year. Current speculation points to bitcoin going in either direction with predictions and reports across carious media showing reasons why BTC will decline and why it should increase over the course of 2020.
While there are a few positive indicators pointing to a possible rebound in the near future, such as greater institutional involvement, a surge in new financial products, and greater difficulty mining clients, technical indicators paint a slightly different picture.
One technical indicator that could mean lower prices for bitcoin soon are the 10- and 50-day moving averages which are currently well above current trading prices.
Given the current technical analysis, many have already made a case for bitcoin to slide to the $9000 mark or below within days. However, others are slightly more optimistic about bitcoin’s current price action.
One such voice, Rupert Douglas - who is known for his work on institutional sales for Koine - has largely shrugged off the dip in value over the best week. According to him and many others, bitcoin’s volatility should come as no surprise to anyone. It is quite common for bitcoin to move very quickly, and often in double digit percentages. What is important to keep in mind, Douglas reminds, is that bitcoin generally sees a period of consolidation before regaining strength to make up for losses such as the one we saw on Thursday.
One reason given for bitcoin getting taken for a ride by the stock market is the growing derivatives trading in cryptocurrencies. With investors now heavily leveraged in short and long positions as they trade high-stakes options and spreads, many were shaken out by bitcoin’s volatility in much the same ways similar investors were in the stock market. Taking BitMEX as an example, there were nearly $50 million in hourly liquidations for derivatives products by the end of the working day.
Another proponent of a bull case for bitcoin is George Clayton of Cryptanalysis Capital. According to Clayton, bitcoin is still trading well within the trend that it had been previously, even despite the drop from almost 10k to 9.3K.
Crypto Breaking Free
While many like to make the comparison between bitcoin fractals and those of the leading stock market indexes, investors in crypto often point to long-term growth as an indicator of the major difference between the two markets. As mentioned, bitcoin is up 30% since the start of the year which is considerably higher than the stock market in general.
Another area that’s important to take notice of when comparing the price action of traditional asset classes and cryptocurrencies is in when and where the crypto markets from the traditional stocks and bonds markets. While it is true that much of the same investor psychology is responsible for price fluctuation to occur as it does in any market, there is a point when crypto’s strong points outweigh those of assets tied to traditional fiat currencies.
It appears that now may be one of those deviating points for bitcoin, seeing as how the fundamental outlook for the popular coin is currently more positive than that of the stock market.
Simply put, that could mean that although price recovery for both stocks and cryptocurrencies may take on a similar shape, it is highly likely that bitcoin and other popular cryptocurrencies will make faster and more drastic comebacks as their prices are derived from different realities.
As usual, there is a lot of speculation as to which direction bitcoin’s prices are going to head. Current analysis suggests that we are still going to see a drop in value before any kind of rebound occurs. However, the market's 'Bulls' could have something else to say about that as many believe it is not necessary for bitcoin to drop in value before returning to its previous channel of growth and higher highs. Whatever bitcoin does in the short term is of that overall picture looks quite positive. We will be watching the situation very closely over the next few days and will have an update shortly.