If you haven’t been watching the cryptocurrency prices over the last few days and only looked this morning, you might scream. On 12th March bitcoin (BTC) dropped more than 50%, although, according to Cointelegraph, it regained 37.5% to trade at $5,200. Today, however, it is hovering around $4,878.
What happened? Horus Hughes says, “the weekend closure of major equities markets appears to be mitigating some of the Coronavirus fear, which has negatively impacted both markets for weeks.”
Hughes also points out that traders appear to be neutral on price direction at the moment, and there is neither a bullish or bearish feel to the market, plus, “The current price action suggests that traders are taking profits as the range top is reached instead of opening long positions and buying on breakouts.”
Signs of a bull market?
Several traders are saying that if BTC can break through the resistance point of $5,500 this would be encouraging. Furthermore, Hughes says, “given Bitcoin’s oversold position and the volume gap from $5,500 to $7,650 could easily be exploited by a high volume spike.” This could send the price back into the $7.750 range that Bitcoin traded in prior to last week’s crash and also set the it up for a move back to $8,500.
What about the bears?
On the other hand, Hughes says, losing the $5,200 support would be far less than ideal. With regard to a bear market forming, Hughes says, “To date, there is sufficient interest in Bitcoin at $3,769, a zone Bitcoin price nearly pierced during the precipitous drop. Below this level, the price of Bitcoin would look to form a double bottom at $3,384 and $3,177.”
However, we must remember that while a rollercoaster ride is not uncharacteristic of the crypto sector, the Bitcoin price is being heavily impacted by the financial crisis created by the COVID-19 pandemic. It is expected that as the pandemic worsens, all the markets will also decline, driven by fear and threat or long-term economic slowdown impact asset prices.
Taking a wait and see approach may be the most we can do. Hughes says, “some Bitcoin investors will advise taking long positions and accumulating as a range develops but with the current global economic uncertainty, perhaps it is better for those with limited capital to rest in cash in order to live to trade another day.”