Bitcoin’s Bounce Fades as Price Returns Below $9,400

An overnight rally for bitcoin gave way to profit-taking on Saturday, as the price plunged nearly $900 from peak to trough. Bitcoin’s market cap has returned below $170 billion at the start of the weekend.

BTC/USD Update

The bitcoin price peaked at $10,235 in the latter stages of Friday’s session before the sellers quickly piled in. In less than an hour, the leading digital currency fell from around $10,100 all the way down to $9,345, the session low. As of 8:40 a.m. ET, the BTC/USD exchange rate was down 4.4% at $9,407, according to Bitstamp. Despite the pullback, bitcoin is trading well above its recent low of around $9,049.

After briefly returning above $10,000, bitcoin plunged 4% in the span of an hour. | Source: TradingView.

Bitcoin is extremely oversold as a result of the latest drop, with the relative strength index (RSI) plunging below 25. A textbook rebound should see bitcoin recover at least some of its early Saturday drop.

At current values, bitcoin has a total market capitalization of $168.5 billion. Its share of the overall market has dropped to around 64.5%. The so-called bitcoin dominance rate was as high as 67% earlier this month.

Trade volumes on verified exchanges have fallen to around $1.1 billion, according to Bitwise ‘real 10’ trading data.

Bitcoin Volatility on the Rise

Bitcoin’s parabolic rally and subsequent correction has created extremely volatile conditions in the digital currency space. Last week, bitcoin’s 30-day volatility index surged to the highest level since February 2018, according to Basically, this means bitcoin’s price fluctuations are more extreme than the period following the November bitcoin cash hard fork.

As we know, the BCH hard fork triggered one of the most brutal bear markets in crypto history.

For crypto traders, volatility is a double-edged sword. It makes rallies like we saw between February and June possible, but also exposes market participants to sharp corrections and deeper selloffs. In the last month alone, bitcoin has traded between a high of around $13,900 and a low near $9,000.

As The Block recently reported, Hong Kong-based trading firm GSR is giving investors direct exposure to bitcoin price volatility. The product, referred to as a ‘bitcoin variance swap trade,’ is being executed with BlockTower Capital, a cryptocurrency hedge fund. Like basic futures contracts, the product allows investors to speculate on the magnitude of bitcoin’s price change over a specified period.

The market for crypto derivatives is heating up. Just last week, Intercontinental Exchange’s Bakkt began testing its physical bitcoin futures product. Fundstrat Global Advisors says a full launch is slated for the end of the current quarter.

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. 

Chief Editor to and Contributor to, 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