Bitcoin Risks Bigger Pullback as Prices Fall to Six-Week Low

Bitcoin pivoted south on Monday, falling to the lowest level since mid-December as bearish forces reasserted their control.

Hard Fall

The bitcoin price plunged to a low of around $3,350 on Monday, as the carnage quickly spread to altcoins and tokens. The sudden move lower shaved more than $6 billion off the combined cryptocurrency market capitalization.

At the time of writing, BTC/USD was trading at $3,412 on Bitstamp and Coinbase. Aggregate data courtesy of CoinMarketCap show an average price of $3,458.58 for a loss of 3.4%.  As the following chart illustrates, the drop began around 18:00 UTC on Sunday and quickly accelerated overnight.

Crypto’s Road to Recovery Is Paved With Obstacles

The latest pullback puts bitcoin in danger of steeper losses in the short term. The leading digital currency has long faced support at $3,550, a major inflection point stretching all the way back to the 2017 bull market. A failure to return above this level puts bitcoin at risk of testing the December low near $3,100.

Trading in BTC has picked up sharply in the last 24 hours. Total trade volumes have exceeded $6.1 billion on virtual exchanges, according to CoinMarketCap. BitMEX, a popular derivatives platform, processed nearly a fifth of total transactions. This is a strong indicator that traders are shorting bitcoin through the futures market.

Bitcoin’s share of the overall cryptocurrency market has strengthened to 53.6%. At current levels, the largest crypto has a total market value of $60.5 billion.

Technical Selloff

As has been the case for going on two months now, bitcoin’s rapid movement can be attributed almost solely to technical trading. Over the past three weeks, the technical tug-of-war has favored the bears. If the month were to end today, bitcoin would be down 7.5% in January.

Prior to Monday’s sudden drop, bitcoin’s volatility index was at its lowest level since mid-November. The 30-day volatility tracker, courtesy of bitvol.info, registered 2.82% on Jan. 27. Traders can expect this number to rise sharply on Monday.

Further downward pressure is likely in the near term as bitcoin resumes its bottoming process. According to Anthony Pompliano of Morgan Creek Digital, BTC will likely find a bottom below $3,000 before making a convincing break higher.

In terms of fundamental developments, investors are still monitoring the fallout from CBOE’s decision to withdraw its application for the VanEck-SolidX Bitcoin Trust. As Hacked reported last week, the decision to pull the ETF application stemmed from a prolonged government shutdown in Washington. Gabor Gurbacs, VanEck’s digital currency chief, also said the application was on temporary hold to explore “appropriate market structure frameworks for a bitcoin ETF…”

Read more: Weekly Recap: Tron, Litecoin Emerge from Crypto Purgatory; CBOE Puts Bitcoin ETF Debate to Rest for Now.

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.

Author:
Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi

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