Christmas isn’t coming early for the Bitcoin market, it seems, for the price of the leading cryptocurrency tumbled yet again on Monday, marking the first notable bout of price action after weeks of non-action.
What forced Bitcoin’s price to slip lower? And, what’s the outlook looking like for this market?
What Caused the Bitcoin Price Drop?
Over the past few weeks, Bitcoin consolidated above the $7,000 support level, barely budging day-in, day-out as a holiday lull seemingly fell upon this market. This consolidation was so mundane that Bitcoin price volatility, measured on a weekly basis, fell to a three-year low.
But this apathy in the markets changed on Monday morning (PST), which was when Bitcoin suddenly plunged by $300 from $7,100 to $6,800. Why?
Unfortunately, no one has exact answers to this question, save for the whales and exchanges behind much of the market’s activity. Though, there are some leading theories. The most notable of these being that a sell-off in Ethereum led Bitcoin to also fall.
Cryptocurrency commentator Hsaka posted the chart below on Monday, which shows that Ethereum started to fall some two minutes before Bitcoin’s decline, implying that BTC was following in the footsteps of ETH, a trend that has been seen before over recent months.
— Hsaka (@HsakaTrades) December 16, 2019
As to why Ethereum fell, thus inducing a fall in Bitcoin, there are two driving theories, according to seeming cryptocurrency trader “Light”:
- A report from blockchain analytics firm Chainalysis revealed that the PlusToken Ponzi scheme still holds 6,400,000 million ETH — valued at some $850 milli
- The second theory proposed by Light is that there is low liquidity in the cryptocurrency markets due to it being the holiday season, thus making the market easier to move. This has been corroborated by the fact that options, futures, and spot market volumes for Bitcoin have fallen off a cliff, which has been echoed by the lack of market volatility.
Long Ethereum from $132. ETH led the move down, nosediving as much as 10% at the low.
Likely drivers of the outsized reaction:
– a factually inaccurate @chainalysis report claiming Plustoken holds 6.4MM ETH (real # likely 789K)
– low holiday liquidity to absorb market selling. pic.twitter.com/kP8SYJtF9K
— light (@LightCrypto) December 16, 2019
Analysts fear that consecutive closes under the $7,000 level could imply that the cryptocurrency market will see fresh lows.
Analysts Remain Optimistic
Despite the bearish day that Bitcoin and its ilk saw, analysts remain optimistic about the cryptocurrency market’s price outlook for 2020.
Adaptive Capital partner Willy Woo, one of the most prominent analysts in the cryptocurrency space, recently remarked that on-chain momentum is starting to “cross into bullish” territory after a multi-month downturn.
With this in mind, he asserted that the “bottom is most likely in,” meaning that any move lower than the $6,500 plunge “will be just a wick in the macro view.” He added that his hedge fund’s indicators also imply that cryptocurrency investors will start to front-run the impending “halving,” the block reward reduction that will be taking place in May 2020.
On-chain momentum is crossing into bullish. Prep for halvening front running here on in. Can’t say what this indicator is, as it’s proprietary to @AdaptiveFund, but it tracks investor momentum. The bottom is mostly likely in, anything lower will be just a wick in the macro view. pic.twitter.com/WqiPRpweUv
— Willy Woo (@woonomic) December 7, 2019
There’s also Spencer Bogart, a partner at top blockchain investment and venture capital firm Blockchain Capital. He said, per previous reports from Blockonomi, that with Bitcoin remaining usable as a global means of payment settlement, the cryptocurrency industry continuing to grow in terms of innovation and capital, and the American public still showing a propensity to own Bitcoin, 2020 could be a strong year for this market.
The post Bitcoin Tumbles Below $7,000 Again Sparking Fears of Downward Continuation appeared first on Blockonomi.