The price of Bitcoin dropped by 9 percent from $9,900 to $9,000 on the day. For now, traders are not worried about a deeper pullback.
The sudden drop in the price of Bitcoin happened after the U.S. stock market unexpectedly plummeted, marking its worst day since March.
Traders mixed on the price trend of Bitcoin
Prominent traders in the cryptocurrency market foresee two potential outcomes for Bitcoin in the near-term.
Bullish traders predict that the $9,100 support level will continue to hold, eventually leading BTC back above $10,000. Subsequent to its drop to $9,000 on major exchanges like BitMEX, Bitcoin immediately recovered to $9,300.
As the price of Bitcoin rebounded above $9,300, cryptocurrency trader Scott Melker wrote:
“This is exactly the 4-hour close that I was watching for – back in the range with a bullish swing pattern failure and holding the ascending support. Now we need to see some follow through.”
According to Datamish, BitMEX recorded around $81 million in liquidations in the last 24 hours.
Often, after a cascade of liquidations wipe out active positions in the futures market, Bitcoin tends to see a decline in volatility.
The open interest of top futures exchanges will likely take time to recover before Bitcoin sees its next highly volatile price movement. The term open interest refers to all open long or short contracts on a Bitcoin futures exchange.
The likelihood of Bitcoin stabilizing with low volatility and lackluster price movements in the short-term fuel the bullish scenario for BTC.
Traders with a bearish outlook in the short-term anticipate a key resistance range in $9,100 to $9,200 to be broken.
Technically, a breakdown below $9,100 would indicate a rejection at a pivotal point. It would also confirm that $10,500 was a local top, raising the vulnerability of BTC to another pullback.
If the price of Bitcoin revisits the high-$8,000 region, it would suggest that BTC rejected a key psychological level at $10,000 for the second time in 2020.
The last time BTC fell from $10,000 in February 2020, it dropped to as low as $3,600. This time around, even if Bitcoin sees such a large price movement, technical analysts expect it to drop to the $6,000 to $7,000 range, not to the $5,000s.
Through the Grayscale Bitcoin Trust, the investment firm facilitates Bitcoin orders from institutions with a publicly-traded investment vehicle.
Gradual accumulation of long-time holders and institutional investors may diminish the downtrend of BTC over the medium to long-term.
Stablecoin Tether also saw an explosive increase in demand as of late, as its market cap surpassed $9 billion. It indicates there is a significant amount of capital on the sidelines that could trigger a sizable rally when investors become increasingly comfortable.