After Plunging with Broader Markets, Bitcoin Price Regains Footing Above $6,300
Bitcoin experienced a quick and painful pullback on Thursday, as the leading digital currency failed to assert itself as an alternative safe haven following a series of massive selloffs on Wall Street and in global markets. That said, BTC appears to have regained its footing after successfully defending a key technical and psychological support.
After falling to the low $6,200 range on Thursday, the bitcoin price has rebounded to $6,310 on Bitfinex. That represents a 24-hour gain of 0.9%. The leading digital currency touched an intraday high of $6,353.40.
Bitcoin was down more than 6% at its lowest point Thursday but continued to defend the critical $6,000 support. This region has proven time and time again to be the minimum threshold market participants are willing to accept for BTC.
After peaking at $5 billion on Thursday, overall trade volumes in BTC is back down to around $4.1 billion, according to CoinMarketCap. At current values, bitcoin has a total capitalization of $108.9 billion.
The yearlong downturn in crypto prices has bitcoin struggling to live up to its status as ‘digital gold’ even as global stock prices tank. Over the last two days, the Dow Jones Industrial Average has sold off 1,378 points to reach its lowest level in over three months. On Wednesday, Wall Street recorded its worst single-day drop since February.
Asian markets have experienced even bigger losses, with Chinese stocks falling to their lowest in two-and-a-half years. The global selloff has pushed the price of gold back above $1,200, as traditional haven plays attracted new buyers.
To be sure, bitcoin’s moves are not correlated with the broader market and the two-day plunge in equities are not responsible for the sudden collapse in BTC. Bitcoin’s ability to move independently of the broader market is one of its most attractive features as a safe haven. It means that investors can hold BTC and not worry about its price being influenced by things like monetary policy, economic data, bond yields or Wall Street speculation.
While bitcoin has been unable to demonstrate its safe haven appeal to new buyers amid the market downturn, the digital currency remains a trusted store of value at a time when developers are looking to scale its use in the payments arena. At the same time, being ‘non-correlated’ does not equate to ‘inverse correlation,’ which means investors shouldn’t expect bitcoin to rise just because the stock market is falling or vice versa.
There was no fundamental catalyst behind bitcoin’s decline on Thursday, which means technical re-positioning and prevailing sentiment continue to drive market prices lower. At the same time, bitcoin typically falls into expiration of the CBOE XBT futures contract, which makes price action especially volatile ahead of the close. As Fundstrat’s Tom Lee pointed out, “overall, bitcoin has fallen 18% in the ten days prior to CBOE contract expiration.”
Trading in the current XBT contract expires Oct. 17.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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