Bitcoin flashed crashed to $7,791.23 early this morning as Asian markets opened, dragging the price down by almost 10 percent and wiping $12 billion of the market cap. Early yesterday it looked set to have a good week after opening strong and climbing throughout the day to a high of $8,602.72, so why this sudden drop?
The current dip is nothing too serious and is far less severe than the drop in mid-May that brought the Bitcoin price down to $6,673 from $8,348 within a day. With the price already leveling out around $7,800 there is still strong potential for a recovery from this point.
What are voices in the crypto-community saying?
Timothy Tam, co-founder and chief executive at Hong Kong-based crypto research firm CoinFi, says this is a ‘healthy retracement’ in an interview with Fortune Magazine. He sees ongoing sell-offs in wider global markets as a possible additional factor and the relatively low amount of capital needed to move crypto markets.
“It just got a little bit extended, this is normal Bitcoin volatility,” he concluded.
As trader and LevelInvest team member Josh Rager pointed out yesterday, if bulls don’t step in this drop could continue down to the previous CME futures gap of $7,175. With a significant decrease in volume lately and a weekly long-wick ‘doji’ candle forming, this scenario now seems quite likely.
The plunge below the significant $8,000 psychological support level is concerning as it now puts the Bitcoin price in a new pattern and reshapes market sentiment.
Crypto-twitter swing trader Jonny Moe (@JonnyMoeTrades) yesterday noted the importance of the 30-day simple moving average (SMA30) in this year’s Bitcoin market. In today’s correction, Bitcoin found support just above the SMA30 at $7,708.38. All short-term moving averages below this point are now in strong sell position, with both the MACD and average direction index (ADI) also suggesting further losses for BTC.
If the sell-off continues, decent support below $7,800 will be found at $7550 and $7,300, the lower line of the 1-day Bollinger band. If any remaining FOMO buyers jump in now and manage to prop up the market, previous resistance at $8,566 remains strong with further resistance around $8,760.