- Bitcoin prices fell to its lowest levels since July 24.
- BTC prices led a market wide crash.
- El Salvador took advantage of the dip to go on a BTC shopping spree.
NEW DELHI (CoinChapter.com) — The world’s largest cryptocurrency, Bitcoin (BTC), prices tumbled downwards on Friday, as a Bitcoin-led market-wide crash wiped over $1 trillion from the global crypto market value.
Bitcoin lost 21.8% of its value between high ($43,544) to low ($34,040) levels in the current week before recovering slightly. The downtrend has brought Bitcoin prices to levels last seen in late Jul last year. As a result of the crash, BTC prices recorded their largest intraday loss (10.27%) since Jun 21.
Additionally, Bitcoin’s downtrend has pushed its prices below its short, mid, and long-term Moving Average q trendlines, making BTC bearish across all time horizons. BTC currently has immediate resistance near the $36,700 mark. If prices break above it, Bitcoin could target the next resistance ceiling near $38,300.
Although unlikely, if Bitcoin begins a sustained uptrend, its price could rise to $38,400 before any pullbacks occur.
Also Read: What could Federal Reserve’s potential 25 basis rate spike this year mean for pandemic winner Bitcoin.
On the other hand, if BTC continues to fall, Bitcoin’s price could move below the $35,000 price level to consolidate above support near $34,400. Further downtrend would likely see support at $33,500 come into play.
Meanwhile, trend-based momentum oscillator MACD charted a bearish crossover for Bitcoin on Jan 21. To recap, a bearish crossover occurs when the MACD line (difference between 12-day and 26-day EMA) line moves below the MACD signal line (9-day EMA of MACD).
MACD’s bearish histogram bars are expanding, indicating increasing strength of bears in Bitcoin’s price momentum.
Bitcoin’s Oversold RSI and Fed Issues
Bitcoin’s 50-day MA and 200-day MA lines plotted a death cross on its daily charts on Jan 14. A death cross is a bearish chart pattern that forms when an asset’s short-term Moving Average trendline moves below its relatively long-term Moving Average trendline.
The pattern usually indicates the potential for a major sell-off.
The death cross combined with the FUD from Federal Reserves’s decision to introduce interest rate hikes earlier than planned might be a reason for Bitcoin’s current poor fortune. BTC has fallen by more than 49% from its ATH ($69,275) in just over two months.
Meanwhile, Bitcoin’s relative strength index is strongly oversold, clocking a value of 20.59 on the daily charts. Interestingly, BTC price’s RSI was this low on Mar 12, 2020, when the token lost nearly 40% of its value in 24 hours. An oversold RSI is often a precursor to a trend reversal for an asset’s prices.
Furthermore, with the Federal Reserve announcing plans to withdraw stimulus from the market and introduce more than three rate hikes in 2022, riskier assets across global markets have suffered. However, crypto’s decline with the traditional financial markets highlights the increasing correlation between the two.
Cryptocurrencies, especially Bitcoin, tout themselves as a hedge against inflation. However, increasing correlation exposes the crypto sector to the same risks plaguing traditional financial markets.
Crypto is reacting to the same kind of dynamics that are weighing on risk-assets globally. Unfortunately for some of the mature projects like BTC, there is so much cross-correlation within the crypto asset class it’s almost a certainty that it falls, at least temporarily in a broader alt-coin valuation contraction.Stephane Ouellette, CEO of institutional crypto-platform FRNT Financial, told Bloomberg
As such, BTC might likely continue its downtrend until Bitcoin catches a few bullish tailwinds or investors change their risk-off attitudes.
El Salvador Goes Bitcoin Shopping, Again!
While investors scurried to recoup their losses, El Salvador, the first country to adopt Bitcoin as legal tender, announced it purchased an additional 410 BTC during the recent crypto market rout.
Also Read: Old man yells at Bitcoin — again.
The country’s controversial President Nayib Bukele took to Twitter to announce the country’s latest acquisition, which the President claims cost $15 million.
Some guys are selling really cheap
President Bukele quoted an earlier tweet, which lamented that he probably missed the dip (low price point of an asset) for BTC. However, after the latest purchase, El Salvador’s President expressed delight in being right about BTC’s dip.
The latest purchase brings El Salvador’s total to over 1,500 BTC. At the time of writing, BTC was trading at $35,399, up 0.57% on the day.