Bitcoin Trapped Under Bearish Pressure; Further Losses Eyed
Bitcoin’s price held lower Tuesday, as the technical tug-of-war between the bulls and the bears continued to favor the latter following the biggest one-day drop in three weeks.
After reaching a low near $3,350 at the beginning of the week, the bitcoin price has recovered only modestly. The leading digital currency was trading as low as $3,395 on Gemini and as high as $3,473 on Bitfinex. Aggregate data courtesy of CoinMarketCap show an average price of $3,443.19, a decline of 0.6% on the day.
Volumes have picked up substantially since the selloff resumed on Monday. Over the past 24 hours, virtual currency exchanges have processed more than $6.1 billion worth of BTC trades. That’s even higher than the recent average of more than $5 billion.
A large influx of bitcoin has entered circulation over the past four months, as long-dormant wallets resumed trading once again. Given bitcoin’s recent price behavior, many of these traders have come out as sellers. Read more: Bitcoin Likely Headed Lower as Whales Activate Long-Dormant Accounts.
Bitcoin is currently trapped below a long-term support line, which is located around $3,550. A sustained drop below that level will likely lead to a re-test of the December low. Below that level, $3,000 is in play.
Tether and the Role of Derivatives
As we reported Monday, there doesn’t appear to be one single factor driving bitcoin’s recent struggles. This means technical short-sellers are likely influencing most of the behavior. This is further supported by the sharp rise in trading activity seen on BitMEX, the de facto derivatives platform for virtual currency traders.
On Monday, BitMEX processed roughly one-fifth of bitcoin’s daily transactions. While that figure has since fallen to around 15%, BitMEX remains far and away the largest platform for BTC trades. During the height of crypto meltdown in November, the exchange processed roughly one-third of bitcoin’s daily transactions.
The technical selloff has also forced many traders to the sidelines, as can be evidenced by the amount of Tether (USDT) held on virtual currency exchanges. USDT has climbed up the market cap rankings as other cryptocurrencies have declined. It peaked in the no. 4 position on Monday with a total market cap of around $2.1 billion. It has since fallen back to fifth. More on this story: Crypto Market Rankings: Bitcoin Cash Falls to Sixth Following Double-Digit Drop.
Bitcoin’s struggles will likely continue for the foreseeable future as the crypto bear market becomes the longest in history. By Feb. 2, the bears will have controlled bitcoin’s price for the longest duration on record. Next month, the crypto bear market will definitively cross the 420-day mark, which is the longest ever for altcoins and tokens.
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.