BTC/USD: Recovery Stalls Near Familiar Resistance

Bitcoin’s price failed to extend its weekend recovery into the Monday session, signs that the dead cat bounce was already beginning to fizzle.

BTC/USD Update

The bitcoin price carved out a slightly narrower trading range on Monday; on Bitfinex, the market fluctuated within a $170 range. At the time of writing, BTC/USD was down 2.3% at $3,557. Bitcoin was trading hands below $3,500 on Coinbase, Bitstamp and Gemini.

Aggregate data courtesy of CoinMarketCap showed an average price of $3,509, down 2.3% over the 24-hour cycle. At current values, bitcoin has a total market capitalization of $61.7 billion. Despite falling more than 40% over the past month, bitcoin’s share of the overall cryptocurrency market has risen to 55.1%. This showcases the extent of the price collapse in alternative coins like Etereum, EOS and bitcoin cash, among others.

As of Monday, futures trading continued to dominate the bitcoin market, with roughly one-quarter of the daily trade volume processed on BitMEX, according to CoinMarketCap. However, this only accounts for trades placed on virtual currency exchanges. Over-the-counter markets are not factored into CoinMarketCap’s data feed.

Bear Market Forces Still Dominate

Bitcoin and other cryptocurrencies remain firmly entrenched in bear-market territory, and there is no evidence to suggest that the sellers are about to relinquish control. Since last month’s flash crash, bitcoin has been caught in a cycle of dump-consolidation-dump, with short-sellers targeting lower lows. At the same time, rallies have been shallow and short-lived, with the market setting perpetually lower highs.

Whereas the previous trading range appeared to be $3,500-$4,500, current price action is stuck between $3,400-$3,700. This leads us to believe that another wave of selling is likely to materialize before the bears are fully satisfied. Practically speaking, this means a test of the $2,800-$3,200 support before the end of December.

While predicting a bottom in bitcoin is notoriously difficult, data from Forbes suggest that a turnaround is likely in the new year. That’s because unique active users and daily transaction volumes are set to rebound sharply in the first six months of the year. More on that analysis here:

Futures trading has had a net positive impact on bitcoin’s stability, and the advent of new futures market in the new year may provide additional support for the leading digital currency. Investors should note that “stability” doesn’t necessarily mean higher prices; it simply means narrower daily fluctuations in the underlying price. Intercontinental Exchange is set to launch its bitcoin futures market in January. Nasdaq is also planning to enter the BTC futures market in the first six months of the year.

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.

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