Bitcoin Braces for More Pain Following 16% Correction
Bitcoin is at imminent risk of falling toward new lows this week, as markets grapple with strong headwinds that have seen the leading digital currency fall 16% from last month’s high.
The bitcoin price hasn’t changed very much in the last 12 hours, and is currently valued at $3,566.39, according to CCN data. The market bottomed at $3,506.72, setting the stage for a much larger pullback toward December lows.
The rationale for this stems from the loss of the $3,550 support level. This long-term trend line, also described as bitcoin’s “GTFO” level, could invite a wave of renewed selling should a definitive breach occur. BTC has fallen below this level on several occasions since last week but recovered each time.
Factoring the most recent slide, bitcoin has now dropped roughly 16% from the Dec. 23 swing high.
At the time of writing, BTC/USD was trading hands at $3,537.90 on Bitstamp. That represents a decline of more than 2% over the last 24 hours. Momentum is clearly to the downside, according to the hourly technical chart. The RSI has fallen into oversold levels multiple times over the last week and currently resides just above the 40.00 mark.
Trading volumes experienced a minor dip Sunday but have since returned above $5 billion on a 24-hour basis, according to CoinMarketCap. Spot exchanges accounted for 85% of the total daily turnover.
At current prices, bitcoin has a total market capitalization of $62.5 billion and an overall dominance rate of 52.9%. The total crypto market was worth $118.2 billion, down from a high near $140 billion last week.
Heavy Volatility Expected
Bitcoin’s volatility index has risen noticeably in the last week, a trend that is expected to intensify in the near term as more coins enter circulation. As Hacked reported on Saturday, anonymous owners of dormant bitcoin accounts are in the process of moving their assets to virtual currency exchanges, possibly with the intent of trading. According to data provider Flipside Crypto, this process has been underway for the last three months.
In the last 30 days alone, previously dormant wallets accounted for about 60% of the circulating supply. A similar influx was recorded in 2015 and 2017, and preceded major price swings during those periods.
Dormant accounts are defined as bitcoin wallets that haven’t been touched for between six months and more than 2 1/2 years.
The following chart, courtesy of bitvol.info, highlights bitcoin’s volatility over the past six months. The 30-day tracker measures the extent to which bitcoin’s price varies over time.
Prior to the November selloff, bitcoin had enjoyed a period of unprecedented stability. Since following below $6,000, the digital currency has been roiled by turbulence. As of Sunday, the 30-day volatility index was 4.49%. It had reached a low of 4.20% last Wednesday.
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.
Featured image courtesy of Shutterstock.