By
Godfrey Benjamin
April 20th, 2024
Bitcoin price has dropped below the $8,000 and analysts believe that the $7,500 zone is now vulnerable but the cause for this abrupt and sharp drop is yet to be determined conclusively.
Just when it seemed like it could not get worse for the Bitcoin HODLERS, the BTC price plunges further. According to data from Messari, BTC dropped below a key support level of $8,000, touching the $7,800 mark. As we published earlier, the BTC price plunged by over $1,000 to settle below $8,500. Now another support has been breached.
The biggest crypto has now entered the $7,000 region for the first time since June amid a severe $30 billion sell-off in the crypto market. In just 5 days, the price has dropped from $10,100 to $7,850 in a 22% pullback against the USD. That represents the steepest correction so far for 2019. The latest drop saw the coin lose more than $200 in under an hour.
It is currently trading around $8,100 but a downsizing movement is still possible. It has been a dark week for the flagship crypto and it could get darker with traders expecting it to test the mid-$7,000 regions in the coming days.
Things are so bad that some commentators, HODLERS, traders, and analysts are crying foul. Many are wondering whether the institutional investors are behind this sharp drop in BTC price. For now, nobody knows why the token is dropping rapidly. The next point of focus is the $7,500 support zone.
After the underwhelming Bakkt launch and the letdown of the market since it did not react as expected, commentators had already predicted a colossal drop. The token already broke out of the descending triangle that had formed since June 26 on the daily chart.
The flash sale that has caused this crash came with an unprecedented large supporting volume. Bitcoin has traded over $19 billion in the past 24-hour period.
What Next?
In the past several days, technical analysts have said that buying pressure will return in the mid-$6,000 range. Some believe that when Bitcoin was oscillating around $10,000 it was not appealing to investors in the crypto market and the general market. As the pullback continues, BTC will become increasingly appealing to traders and new investors.
The price has fallen by over two-fold since the yearly high but also increased by two-fold since the December 2018 lows at $3,150. Some analysts like Hsaka believe that Bitcoin is in an extended correction phase. Thus, in such a downtrend the near-term trend is more likely to continue in the same direction.
$BTC Macro
Whenever price breaks a multi-month support or resistance, it usually sees continuation in the direction of the break.
Fail to understand the knee-jerk reaction of fighting the first sign of momentum we've seen in ages.
Buying every "dip" is an expensive lesson. pic.twitter.com/SaTfOwgDqA
— Hsaka (@HsakaTrades) September 26, 2019
The drop from around $8,400 to $7,850 has come from a cascade of long contract liquidations on many major margin trading platforms like BitMEX. Yesterday, Datamish reported that $77 million worth of long contracts have already been liquidated on BitMEX. That follows the liquidation of over $650 million on September 25.
The diminishing volume in the global BTC market in spite of growing sell pressure and huge sell-offs have dominated the market. These market characteristics make it easier for the bears to take over the markets and intensify the downward movement.
Analysts also think that the expiration of CME Bitcoin futures contracts on September 27 may also have fuelled the sudden drop in the Bitcoin price. Over 40,000 contracts on CME are scheduled to expire in the coming few hours.
Is $6K Imminent?
The intensity of the Bitcoin price drop this week and the lack of formidable support levels between mid-$6,000 and mid-$7,000 may open doors for a drop to the $6,000s in the short term. That could be avoided if there exists a serious reaction to the mid-$7,000 support preventing further drops.
Discussing the previous drop, Rager said:
“If Bitcoin fails to break above the current level, we’ll get another retest of the support below – which has bounced once and could hold. But if this isn’t a bear trap I do see price heading down to low $7ks Lots of buyers are waiting between $6,180 & $6,500.”
Bitcoin Futures Contracts
According to Bendik Norheim Schei of Arcane Research, certain kinds of Bitcoin futures contracts are relatively easy to manipulate. These contracts issued by CME Group in Chicago, unlike those on Bakkt, settle in cash instead of actual Bitcoins. Allegedly, they let traders bet against Bitcoin and short its price without any Bitcoins changing ownership.
That is not the first instance of suspected Bitcoin manipulation. John Griffin released a report in 2018 suggesting that BTC’s price spikes in 2017 resulted from manipulation by Tether owners. The finance professor at the University of Texas said that the Tether owners used the stablecoin to buy BTC every time it dropped thus pegging it to the USD.