Breaking: Crypto Rally Unwinds as Bitcoin Plummets Below $8,000, Altcoins Shed $10 Billion
Bitcoin (BTC) and the broader cryptocurrency market suffered a brisk selloff late Monday, as overbought resistance became too much to handle for an asset class that has more than doubled in value since February. The sharp reversal comes less than a day after Hacked warned that the bitcoin market had all the symptoms of bullish exhaustion after failing to top $9,000 following sucessive attempts.
Cryptocurrencies Bleed Market Cap
All of the major large-cap cryptocurrencies reported sharp declines on Monday, with altcoins and bitcoin falling virtually in lockstep with each other. Peak-to-trough, the total cryptocurrency market capitalization shed $24 billion on Monday, with the bulk of the declines occurring over a one-hour window beginning around 19:00 UTC.
At the time of writing,Cosmos was the only top-ranked coin to have escaped the downward velocity.
Bitcoin traded as low as $7,732.00 on Bitstamp, having dropped more than $1,000 from Monday’s intraday high. The BTC/USD exchange rate was last seen trading just below $7,950, where it was down 1.9% during the session.
For the first time since late April, bitcoin’s relative strength index (RSI) has fallen below 60 on the daily chart, a sign that upside momentum was unwinding. The accumulation/distribution line still confirms the bullish bias, so there’s no sense being too alarmed by the latest pullback.
Looking at the altcoin/token universe, Ethereum (ETH) fell 7.3% to $248.78. XRP was down 6.4% at $0.4176. Bitcoin cash (BCH) and EOS each recorded double-digit percentage losses after being two of the top-performing cryptos of 2019.
Coins 10-13 – them being Stellar (XLM), Cardano (ADA), Tron (TRX) and Monero (XMR) – were each down by at least 7.9%.
Overbought Correction or Calm Before the Storm?
A sharp correction from overbought levels is the most likely explanation for the market’s sudden price collapse on Monday. As a nascent asset class, cryptocurrencies are still prone to wild fluctuations, much more than conventional assets like stocks or currencies. Astonishingly, declines like the one we saw on Monday come even as crypto market volatility has decreased in recent years.
Case in point: bitcoin’s yearly volatility fell from 16% in 2011 all the way down to 7% in 2018. In other words, volatility has declined as bitcoin’s price has increased.
Monday wasn’t the first time that crypto markets have reversed course during the current cycle. But unlike the “jackass whale dump” of mid-May, the latest selloff doesn’t appear to be caused by a single trade.
Bitcoin just rounded out its fourth consecutive monthly gain, the longest streak of its kind in nearly two years. As Hacked reported back in April, bitcoin’s four-year cycles are marked by dominant uptrends and downtrends that tend to last anywhere from three-to-five months. It remains to be seen whether the latest pullback marks the end of the latest round of crypto euphoria or is just another short-term blip en route to new highs.
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. Charts via CoinMarketCap and TradingView.