Did a Whale Sink Bitcoin?

Bitcoin’s precipitous drop over the past four days may have finally triggered a relief rally. The leading digital currency fell to nearly one-month lows on Sunday before rebounding 4% in a matter of seconds.

BTC/USD Update

The bitcoin price clocked a high of $6,458.90 on Bitfinex Sunday after surging 4.2% in a matter of seconds. The leading digital currency was last seen trading at $6,393 for a gain of 3.4%.

With the gain, bitcoin has bounced off oversold levels with the relative strength index (RSI) returning above 40. The coin’s underlying momentum remains weak after prices breached both the short-term and long-term moving averages. What’s more, the bullish crossover that materialized Aug. 31 appears to be fading.

At current values, bitcoin is capitalized at $110.7 billion with daily trade volumes amounting to $4.1 billion. BTC’s share of the overall cryptocurrency market is 55.4%. The dominance rate peaked above 56% on Saturday as crypto assets approached new yearly lows.

Bitcoin Whale?

Bitcoin’s sharp and sudden reversal has not only neutralized the long-term bull market, it has raised the spectre of a more protracted downturn in the near future. The coin’s $1,000 correction, which occurred over the span of 24 hours last Wednesday and Thursday, is a strong signal that bearish forces still control the market. This means we may be entering a period marked by lower lows and lower highs, which makes day-trading extremely difficult for those not accustomed to tight stops.

That said, mining costs have enabled bitcoin to maintain a firm price bottom at $6,000. This is the level at which some miners struggle to keep their operations profitable.

While bitcoin’s sudden reversal was tied to rumors (now proven false) that Goldman Sachs was abandoning its plans to launch a crypto trading desk, the wheels were set in motion roughly one week before the collapse happened. That’s when roughly $800 million worth of bitcoin and bitcoin cash were moved to multiple wallets, possibly for liquidation. Roughly 14% of the funds were later moved to Bitfinex and Binance, two leading digital currency exchanges. Several hundred units of BTC were also reportedly moved to Bitmex, one of the most popular derivatives markets for cryptocurrency.

According to investigations, the funds likely belong to Dread Pirate Roberts, a former Silk Road administrator and Mt Gox user who has been dormant for the past four-and-a-half years.

Wallets associated with Mt Gox have undergone a slow and gradual liquidation by Nobuaki Kobayashi, the so-called Tokyo Whale tasked with offloading all remaining assets of the now defunct exchange. Kobayashi has already sold hundreds of millions of dollars on behalf of Mt Gox creditors.

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 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