Bitcoin Price Eyes Bigger Pullback Following Punishing Correction
Bitcoin’s (BTC) value edged further to the south on Wednesday, putting traders on high alert for a steeper fall in the short-term as markets correct from extremely overbought levels. The leading digital currency underwent a punishing reversal late Monday amid signs that another bitcoin whale triggered a large sell order on Coinbase.
The bitcoin price reached a session low of $7,672.73 on Bitstamp, where it was approaching the lowest consolidated levels in nearly a week. At 9:07 a.m. ET, bitcoin was holding at $7,768, up 1.3% on Bitstamp but down more than 2% over the past 24 hours.
Bitcoin’s long-running accumulation phase appears to be winding down ,according to the accumulation/distribution (A/D) line. The volume-based indicator measures underlying supply and demand in the market. A rising A/D line suggests more traders are buying instead of distributing bitcoin. When the A/D line falls, it means the opposite is occurring.
After rushing to all-time highs, the A/D line is backtracking presently. The daily relative strength index (RSI) is also unwinding sharply, falling back to the low 50 area. The RSI was severely overbought during the height of crypto euphoria back in May. Read more: Hodlers Power Bitcoin’s First Four-Month Winning Streak in Two Years.
At current values, bitcoin has a total market capitalization of $138.6 billion, according to CoinMarketCap. The market capitalization peaked near $160 billion last month.
Steeper Fall Coming?
Bitcoin’s brisk selloff on Monday had all the markings of a technical reversal following multiple failed attempts to break above the key $9,000 level. Colleague Joseph Young did a postmortem of the rapid price drop and discovered that it may have been triggered by another whale dump – this time on Coinbase.
About 30 minutes before the price dump, a bitcoin whale moved 25,000 BTC to Coinbase. An hour after the selloff, a whale moved 14,000 BTC from Coinbase to another wallet.
Given that Coinbase’s BTC/USD cross generates volumes of less than $215 million, it’s unlikely that the selloff was solely attributed to whale manipulation. Our original position that the drop was due to technical trading/profit-taking is still viable. However, it’s clear by the Coinbase activity that whales are still causing a ripple effect on the market.
Technical analyst DonAlt announced last week that he has become net short on bitcoin for the first time this year – and that was before the recent pullback. Crypto trader Josh Rager has also reminded investors that 30% reversals in a bitcoin bull market are very common. If we assume another 30% drop in the current cycle, bitcoin’s price could fall back down to the mid-$6,000 range before the next wave of accumulation takes place.
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. Chart via TradingView.