After a stellar week last week that saw the Bitcoin price come close to breaking $14,000, the weekend brought only red to the cryptocurrency markets. BTC is down 8.3 percent today, with Ethereum (ETH) down 5 percent, XRP down 3.5 percent and Litecoin (LTC) down a huge 10.5 percent.
Despite a decent effort to bounce back above $13,000 on Friday, resistance proved too strong for Bitcoin and bears took control throughout the weekend. The Bitcoin price is now trading just above $10,000 and looks likely to suffer further losses as the week continues.
What’s causing the drop?
Several reasons could be to blame for the drop but for the most part, the market is simply following normal technical behavior. Several analysts have already predicted a correction such as this current one following the parabolic rise Bitcoin experienced last week. Coupled with a large section of retail investors looking to take profit as Bitcoin broke back above 2018 highs and its easy to see why the market turned bearish.
Large investors ‘claiming’ shorts is another aspect that could have attributed to the weekend dump. Twitter account @crypto_monopoly pointed out a sudden drop in BTCUSD shorts on Bitfinex by two-thirds when a traded closed a $220 million position. There has been talk about some traders using short positions to sell large quantities of BTC in a way that would avoid the sale appearing on exchanges.
Where to from here?
An unfortunate side effect of a parabolic price rise is that it leaves little room for an asset to build support. With very few strong support levels to keep BTC afloat, the price could easily tumble right back down to the last key trading level around $6,400. This level has proven to be a significant support level for the BTC/USD trading pair in both this year and last.
With a lot of FOMO buyers now in debt, we could be in for another long and drawn-out correction before new investors feel confident to put money back into the market. With the Bitcoin price continuing to slide, BTC technicals are increasingly turning bearish. Short-term 5-, 10-, and -20 day moving averages and the MACD all put BTC in a selling position, while it’s relative strength index (RSI) remains neutral.
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