After a week of fighting back against a rising tide, the cryptocurrency market finally appears to be giving in to selling pressure. After reaching a yearly high of $252.44 billion last Sunday, the market began a gradual decline that has taken it down to current levels at $232.90 billion.
Amongst the worst affected cryptocurrencies are international remittance coins Ripple (XRP) and Stellar (XLM), each down by over 17 percent in the past week. Bitcoin (BTC), by comparison, is only down by 4.67 percent and appears to have found strong support above $7,600.
Why the drop?
The selloff is not unexpected, with analysts around the world warning of an impending correction following last week’s parabolic price increases. For this reason, it would seem that bads news or negative sentiment is not to blame and this minor correction may be a good thing in the long run. Other than the news of Dutch authorities busting another Bitcoin mining scam, nothing particularly notable has occurred that may cause fear within the market.
For financial instruments to make long-term, reliable gains they need to go through periods of stability or consolidation during which time investors can accumulate in preparation for further increases. While this current dip may suffer further losses it is likely a minor correction before a much larger bull run.
Bitcoin is facing strong resistance at the $7,800 level due to a confluence by the simple moving average (SMA) 200 and its 1-hour Bollinger Band. Having tested this point three times it may prove a tough level for Bitcoin to break through and as a result, BTC has now retreated back to safer ground at $7,600.
The BTC/USD price is back within its 1-hour Bollinger Band and the relative strength index (RSI) has fallen outside of overbought territory and is now neutral. Until a significant amount of buying interest has returned to the market its unlikely Bitcoin will make any large gains in the immediate future. Support will found around $7,550 at the bottom end of the Bollinger Band but a drop below this could extend as far as $7,200 before further support is achieved.
BTC/USD is currently trading at $7,617 with a market cap of $134.94 billion.
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