11 Sep 2020
Bitcoin price briefly dropped under $10,000 which has made the entire cryptocurrency market slump for a little while.
It (BTC) dropped below $10,000 across major exchanges again on Sep. 5, which signified two days, back to back, of dipping below the waterline. Other well known cryptocurrencies, including Ethereum’s Ether (ETH), fell by almost 10%.
The daily chart of Bitcoin
The daily chart of Bitcoin. Source: TradingView.com
Three factors that might have been the culprit behind the abrupt dip of Bitcoin include miners, a strong dollar and large investors(whales) making and taking profits.
Did these whales take profit? As price of Bitcoin abruptly dipped by 5% to $9,975 on Binance, BitMEX liquidations were under $40,000,000. Usually, when a massive price change happens, it causes over $100 million worth of futures contracts out of the game.
The futures data implies that the pressure to sell comes from the spot market. There is a chance, albeit a low one, that retail investors will start dumping aggressively at above $10,500.
Whales taking profit at $10,500, which was taken for granted as a resistance level for Bitcoin for many years, is much more likely.
But whales were taking profit since Bitcoin climbed to $12,000. As Cointelegraph previously stated, a whale sold at $12,000 after “HODLing” BTC for over two years.
Some miners potentially selling Over the week, on-chain data provider CryptoQuant stated that mining pools had been taking profits. Ki Young-Ju, the firm’s CEO, said:
“Miners send a certain amount of BTC to exchanges periodically, so they already have a large amount of BTC in the exchange. Whenever they decided to sell, it seems they move a relatively significant amount of BTCs to other wallets, and some of them are going to exchanges.”
The steady sell-off of BTC by miners since mid-August might have contribututed to significant selling pressure on Bitcoin. Alternatively, Poolin vice president, Alejandro De La Torre, pointed out that it is a challenge to accurately track miner outflows. He stated:
“I can reassure you that CryptoQuant does NOT know which wallets are owned by Poolin. perhaps it's a handful of (big) miners they are tracking... even still, many assumptions.”
A strong dollar, ETH weakness A common phrase over the last two weeks as Bitcoin stabilized was surely the increasing strength of the USD. The USD began showing good signs of recuperation after four months of downside as the EUR started slumping.
As both Bitcoin and gold are usually valed by the USD and many BTC traders are in the US, the rising of USD value contributed to BTC’s slump.
Important technical levels for ETH/USD
Important technical levels for ETH/USD. Source: TradingView.com
The noticable fall of ETH price might have hastened the downtrend. On Sep. 5, ETH dipped under $360, even below $340. A recognized trader under the name of “Byzantine General” stated that if ETH goes under $360, $290 might be the following target. He said:
“I've learned that this is an ‘ascending, right angled, broadening formation. Very typical after an uptrend, and a pretty neutral pattern: 55% of the times breaks out upwards. But man, 360 better hold or otherwise we go straight to 290, possibly 250.”
Ether was the front-runner of the Bitcoin sprint since early April and ETH weakening could have amplified the short-term fall of BTC. Meanwhile, Bitcoin has since stabilized above $10,200, somewhat recovering from the slump. The trend shows steadily rising buying demands above $10,000, that might lead to better future prospects for BTC and consolidation over longer periods.
Michael van de Poppe, a full-time trader at the Amsterdam Stock Exchange, implied that there might still be hope for a bullish BTC, noting:
“Finally, liquidity at the lows taken. Reclaim of $10,000 would mean a S/R flip and a very probable chance we'll look for liquidity above the range highs. That would suit a bounce towards $10,750-10,900 and majority of the markets bounce 25-40%.”