Parliament stymies Boris Johnson and his Brexit aspirations. Trade talks show no progress, and China releases worst economic data in three decades. A trio of news stories that could wreak havoc in financial markets and send capital fleeing for safe havens, but not to Bitcoin, at least not yet. The world’s favorite digital asset had improved a bit, recovering to $8,300, but it has succumbed to whatever dark forces are now pushing it southward, descending to $7,500. This cycle keeps repeating, but why?
Some analysts are calling it a “Bitcoin Flash Crash” and attributing the sudden nosedive to Libra hearings on Capitol Hill. Mark Zuckerberg is being put through the wringer. In a piece by Bloomberg, Matt Maley, equity strategist at Miller + Co., explained:
The main reason for this is because of the immense pressure Facebook’s Libra is getting from Washington. That is basically making it much less likely that Bitcoin will go mainstream as quickly as some of its bulls think it will.
Other analysts are looking in the rearview mirror at articles that appeared weeks back about Google establishing supremacy in the “quantum computing” race, a perceived threat for cryptographic platforms like Bitcoin and their related “proof-of-work” mining support systems. Experts in the field are not buying into these notions, claiming that the perception is far removed from the reality of the situation. Quantum computing has often been more dream than substance, and a simple tweaking of current encryption standards could thwart the threat before it ever materialized, emphasis placed on “ever”.
But Bitcoin did plummet 10%, as did altcoins, but at a heavier pace, 13% and higher. When presented with such a dramatic shift in the fortunes of cryptos, analysts begin to scurry about, looking for more than just one reason, the logic being that such a crash could only be the result of a cavalcade of issues. We have already listed the “Top Five”, so to speak, but here is a quick summary of other suspected “smoking guns”:
- On the technical side, the 200-day moving average has been a hammer that would not quit, but there is also a “bear cross” forming, where a short term MA crosses a longer-termed one, which would signal dire consequences ahead;
- Futures contracts are being liquidated at a quickening rate, and the last Friday of October, the all-encompassing expiration date for these contracts, is actually occurring this week, not next week;
- Tether, a stablecoin, has actually been trading at a discount, a harbinger that capital is moving out of cryptos for some reason;
- Bitcoin has been ranging within tight boundaries, as volatility shrinks. One popular indicator, the Bollinger Bands, when it tightens as it has, always signals that a major breakout is imminent, with no hint as to direction;
- Lastly, liquidity within the crypto space has been on the decline, as volumes and volatility reach new lower levels.
If Bitcoin can recover from this firing squad of ten rifle shots at once, and we did not even mention that unfilled “gap” below $7,500 on the CME futures exchange, then it will surely receive the “Resiliency Award” for 2019. If we look over at equities and Gold, both are slightly up on early morning trading, suggesting the problems are crypto-centric. It may be all up to Zuckerberg and if he can produce an impressive performance on the Hill, but the odds of that happening are surprisingly low at the moment. Republicans would love any distraction that would take impeachment inquiries off front-page news.
At the end of the day, there is one clear message from today’s rather debilitating activities. Matt Malay summed it up with this concise remark:
The fact that this is losing so much momentum so quickly is telling people that Bitcoin as a widely accepted currency is going to take longer than they were hoping.