What an Awesome Sell Off

Well, it finally happened. Bitcoin saw a massive retracement of 18.76% from the new all-time high of $11,346. The freefall lasted for a total of 5 hours and 25 minutes and brought the price down a total of $2,129 from top to bottom making the quickest ever drop in the young digital currency’s history.

We’ll get into the possible reasons for the sell-off below and where we might be going next but I wanted to say that no matter what happens in the next 13 hours, November will have been one of the strongest months on record for the cryptocurrency industry.

@MatiGreenspan
eToro, Senior Market Analyst

 

Please note: All data, figures & graphs are valid as of November 30th. All trading carries risk. Only risk capital you’re prepared to lose.

Market Overview

The sell off yesterday wasn’t restricted to the currency market. It actually started in gold and quickly spread to the entire tech sector.

Over the past few months, we’ve been seeing massive gains in tech stocks, commodities, and industrials, of which the crypto market is a mere amplification.

In this chart, we can see that gold’s drop of about $10 an ounce (yellow circle), which occurred about an hour before bitcoin peaked. Once the stock market opened on wall street we can see the blue line (facebook) opening with a massive plunge.

The stock market as a whole didn’t do too poorly yesterday with the healthcare sector making up for most of the losses in tech.

We’ve already seen quite a bounce back on bitcoin but it’s still not clear if the sell off is over. We should be watching the price action very closely over the next 24 hours for any clues to what could happen this weekend.

For those who have been waiting patiently for a pullback this just might be your chance. Of course, a prudent stop loss may be in order just in case we do get lower.

I put a quick poll out on Twitter yesterday to try and gauge what you guys are thinking. With 25 votes so far we don’t really have the best sample size but please feel free to weigh in here as the poll will be open until the end of the day.

Congestion

In yesterday’s update, we showed that the number of unconfirmed bitcoin transactions was standing at 50,000, which is a bit high but somehow sustainable. At the hight of the sell-off last night it reached as high as 97,000 pending transactions, which is already a dangerous level.

Though minors are working hard to confirm transactions as quickly as possible, as of this writing the mempool is still up around 74,000.

What’s a bit more worrying is the frequency of transactions which is currently quite high, with an average of 4.18 per second.

We’ll keep an eye on this as far as bitcoin is concerned. Of course, the rest of the crypto market is strongly correlated with bitcoin’s performance but if this congestion does cause a drop in BTC we might see other cryptos gaining against it as most of them are newer and more scalable than the original blockchain.

What else?

The big OPEC meeting is today. Markets expcet OPEC and Russia to extend the current production cuts for an additional 9 months. If they fail to meet this expecation, we could see the price drop even further.

Also keep an eye out for updates from Germany and the UK as they are both close to reaching political deals that could move the markets.

Let’s have an awesome day!!

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.
The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.