Bitcoin Price Faces Steep Decline, Hitting a Two-Month Low
Bitcoin falls 8% to a two-month low of $25,314, sparking a collapse in all other cryptocurrencies and resulting in $1 billion in liquidations.
Bitcoin, the flagship cryptocurrency, fell by more than 8% in a matter of hours on Thursday, reaching a two-month low of $25,314 (As of now 11% down). This precipitous drop was a remarkable change of events, putting Bitcoin on track for its worst week since November of the previous year.
Furthermore, the abrupt drop had a domino effect on the whole cryptocurrency market, resulting in over $1 billion in liquidations.
Reason Behind Bitcoin's Tumble
The factors that contributed to this crash are numerous. According to Bloomberg, one major aspect is the looming likelihood of prolonged high-interest rates mixed with a thin trading environment in the crypto industry.
Stephane Oullette, a representative of FRNT Financial, told Bloomberg about a historical pattern in Bitcoin's behaviour. Each dip in Bitcoin this year, according to Oullette, has been followed by a subsequent recovery. The coming days will reveal if the current sell-off will continue or if a reversal is forthcoming.
Oullette emphasized that
"Bitcoin's trajectory hinges on its position relative to key price levels. A breach below the $25,000 threshold could signify a departure from this year's trend. Conversely, surging past the $30,000 mark might propel Bitcoin beyond its 2023 high of $31,818."
Joseph Edwards, the Head of Research at Enigma Securities, attributed the price decline to a blend of low volatility and waning interest from retail investors, according to a Reuters report. Adding to this perspective, Riyad Carey, a research assistant at blockchain data firm Kaiko, highlighted the market's susceptibility to larger trades. He pointed out that the past four months have witnessed the lowest average daily volume of crypto transactions since 2020.
The cryptocurrency market's reliance on narratives to bolster prices has been a recurrent theme. The impact of Elon Musk's SpaceX allegedly selling its Bitcoin holdings after a $373 million write-down, as reported by The Wall Street Journal, played a significant role in exacerbating Thursday's crash.
Bitcoin's journey through the summer has been relatively subdued, marked by a lack of the hallmark volatility that had drawn numerous investors in the past. However, this tranquility was shattered as the cryptocurrency plummeted more than 8% in a few hours, descending to a two-month low of $25,314. This abrupt dip triggered a domino effect across the cryptocurrency spectrum, culminating in liquidations exceeding $1 billion.
The crypto market's dynamics are intricately tied to narratives that can either ignite or deflate prices. The Wall Street Journal's revelation about SpaceX divesting its Bitcoin holdings after a significant write-down not only intensified the crash but also underscored the market's susceptibility to external narratives.
Bitcoin Price Analysis
As per Coinstats, Bitcoin is currently trading at $25,986.16, down -1.74% in the previous 24 hours, with a live market cap of $506 billion. It has a circulating supply volume of 21,000,000 BTC coins and a maximum supply volume of 21,000,000, with a 24-hour trading volume of $55B.
Source: CoinStats
On August 17, Bitcoin's narrow range resolved to the downside, prompting a long liquidation that pushed the price to $25,166. The bulls are anticipated to vigorously defend the $24,800 mark. The relative strength indicator (RSI) is oversold, indicating that the BTC/USDT pair may experience a pullback or consolidation in the near future.
If the price rises sharply from $24,800, it might reach the 20-day exponential moving average (EMA) of $28,786. This is a crucial level to monitor. If the price falls below the 20-day EMA, it indicates that bears are selling on rallies. This might raise the chances of a break below $24,800. If this happens, the pair's value might plummet to $20,000.
The first indication of strength will be a break and closing above the 20-day moving average. This suggests a possible consolidation in the near future.
Source: TradingView
Conclusion
While external factors, narratives, and market sentiments continue to sway the cryptocurrency market, the true test of resilience lies ahead. Whether Bitcoin can navigate these choppy waters and reestablish stability or continue to experience significant fluctuations remains to be seen. As Bitcoin's price activity reverberates through the cryptocurrency realm and beyond, traders and observers eagerly await signals of stabilization or further turmoil.
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