Bitcoin prices tumbled on its first official trading day of the year, retreating sharply from an all-time high of $34,810 it established on Sunday.
The BTC/USD exchange rate fell by as much as 20.49 percent to an intraday low of $27,678 during the early European session Monday. So it appears, some traders decided to sell their Bitcoin holdings at local tops to secure short-term gains.
The backlash also occurred as the cryptocurrency ventured too deep into its overbought territory, a move that amounted to neutralization via sell-off strategies.
Nevertheless, Bitcoin quickly recouped a portion of its intraday losses with a sharp retracement. It rebounded back above $30,000 ahead of the US session. Most recently, BTC/USD was trading at $27,678.
Bitcoin Rally to Resume?
Konstantin Anissimov, the executive director at CEX.IO, said the Bitcoin’s sharp rebound from its intraday low suggests that traders are ready to buy the dips. He added that most players who have purchased Bitcoin during Monday’s plunge are institutional and professional investors with adequate capital in their hands.
“The pullback clearly demonstrates how much buying volume is stashed around all areas of price consolidations below 31.000,” Mr. Anissimov told BlocDesk. “Therefore, every such dip is likely going to be an excellent buying opportunity in the coming weeks, and it is possible that BTC/USD will go back to 34,000 today, 4th January 2021.”
The buying sentiment primarily surfaces over repeated bearish analogies about the US dollar and government bond yields. The Federal Reserve’s decision to keep its lending rates near zero and buy Treasurys indefinitely has raised investors’ inflation fears. Bitcoin, with its limited supply cap of just 21 million tokens, is offering to become a mere hedge.
That has prompted prominent traders Paul Tudor Jones and Stan Druckenmiller to gain small exposure in the Bitcoin market. Meanwhile, companies such as MicroStrategy, Square, and MassMutual have also purchased the cryptocurrency as their bet against inflation.
Many analysts believe more individual investors, hedge funds, and corporations would take a similar call in favor of Bitcoin. Some of them expect the price to cross $100,000 by the end of 2021. That partially explains why traders quickly bought the Bitcoin’s latest dip.