Bitcoin’s travails accelerate. BTC was continuing its slow grind southward, passing $9,600, but then a left cross came out of nowhere, landing securely on its chin, driving it to $8,100 in a flash. Dazed and on the canvass for the count, Bitcoin seems to have lost all sense of stability. As the capital is sucked out of Bitcoin, the same can be said for altcoins, which had been hopeful of a new “Alt-Season”. NOT! Upon scanning other financial markets, the abrupt decline seems to be mirrored across the board, suggesting a systemic cause in process. Bitcoin’s fabled resiliency is about to be tested once more.
Source: coindesk
There are no direct explanations front and center for why Crypto-Land is under threat. Yes, the SEC declined to act on the Wilshire BTC EFT application, preferring to delay it another three months, but everyone on the planet was expecting this delay. Crossing over to the equity world, the causes begin to take shape. Talks of impeachment of President Trump are dominating headlines, posing a long-term distraction, not a good thing for equities. Of a larger note, however, was Trump’s speech before the United Nations. He talked tough about the China trade war, thereby stirring up more “FUD”.
If the market overreaction to trade wars, a potential global recession, all coupled with impeachment hearings, caused the current spike, then we might expect a quick rebuff or, as in Wall Street lingo, a “dead cat bounce”, as the chart demonstrates. If there truly are large institutional players looking for bargains in the Bitcoin and alternative crypto markets, their wish has been granted. These kinds of windows typically are temporary, which only means that we should have confirmation of the situation shortly.
What if this situation is not temporary, what then? Let’s start with the Bitcoin 1-Day chart shown above, which was provided courtesy of Coindesk. The chart is a snapshot just after the “flash crash” with the bounce included. Since June, Bitcoin has been in decline, vibrating, if you will, between $11,500 and $9,500. If today’s break below this support level could usher in tests of lower figures, all the way down to $7,500.
Let’s also assume that the current dip to $8,100 does reverse itself. We are then left with the converging triangle formation, which has been forming since last June. The key level to watch would be $9,300. Much of the optimism that had buoyed Bitcoin over this long ranging period had to do with fundamental drivers from potential institutional involvement from the likes of Fidelity, TD Ameritrade, e*Trade, and the Bakkt exchange. All of these projects have been slow to get off the ground.
Analysts had warned that large firms and projects, such as these, tend to be extremely conservative by nature. They take their time. No one is in a hurry to make huge waves or bet the ranch, so to speak. It will take time to see the eventual impacts on the crypto industry that these programs will have, but in the hurly burly world of crypto, if it doesn’t happen quickly, then the sky might fall.
Under such negative circumstances, the Bitcoin narrative quickly deteriorates, but the narrative supports investor sentiment, and investor sentiment in turn is what justifies Bitcoin valuations in the first place. If there is a “safe haven” aspect to Bitcoin, today is not the day to test out that hypothesis. Financial markets are churning. Futures markets are all a flutter after stock exchanges closed for the day. Financial news channels are adding more fuel to the fire to amp up any emotions that remain uninformed.
As I write, Bitcoin is trying to recover, bouncing back over $8,600, but it may take the next 24 hours to determine a new direction that makes sense. Any of a number of scenarios could play out over the next few days. Professional shorts could gear up on the Bakkt exchange to test how low and how resistant Bitcoin is to their bag of tricks. A larger issue may involve whales that choose to move their funds about to make waves, or on a positive note, large investors could swoop in and gobble the bargains, while they are still hot. The BTC rollercoaster is moving – Buckle up, and enjoy the ride!