The cryptocurrency market is approaching a critical level this week.
Bitcoin is clinging onto support at $6,150 which, if broken, could transcend the market into a phase of capitulation and yearly lows. Altcoins also look extremely bearish; Ethereum’s rally of last week has all but faded as it dips back below $200, while Litecoin, EOS and Cardano are all down 10% this week.
Why is the market so bearish?
There is an argument that all of the attention on the drama-fuelled Bitcoin Cash fork has seen the open interest in Bitcoin and the rest of the market subside, but in terms of volume Bitcoin itself has remained fairly stagnant since mid-October, hovering around the $3.7 billion to $4.9 billion level ever since.
From a technical standpoint the $6,150 level of support continues to be crucial. Despite having suffered a gruelling 10-month bear market, Bitcoin is yet to break this level with conviction. With sentiment at such a low point and altcoins all ticking lower, this could be the time when Bitcoin dives into the rabbit hole to find a new level of support.
The more times the $5,900-$6150 level of support is tested, the weaker is gets. While it is possible for Bitcoin to defy all odds and bounce back, there are so many technical levels to bypass so the likelihood is that a major news catalyst would be needed to propel price to the upside.
Volatility and potentially new lows
The last few months have been the least volatile in Bitcoin’s history. Even the stock market has seen more movement. This suggests that if a move in either direction is to happen, it will be powerful and unexpected as the level of volatility cycles back around.
If the yearly lows do eventually break, the next levels to look out for are $5,400, as this acted as support twice this time last year, and $5,000. However, if the market is to truly capitulate it will tick a lot lower than people expect. So a capitulation low of $3,000 is not out of the question in what could be a positive move for Bitcoin in the long term.
In February of this year Bitcoin fell dramatically, cascading down to $5,900 before the bulls came back and bought it up to $11,800. This is the type of scenario that could happen if the $3,000 moves comes into play.
As the cryptocurrency world focuses on the war of words between Bitcoin Cash’s Roger Ver and Dr Craig Wright ahead of the fork, the leader throughout this, Bitcoin, is falling by the wayside.
In the aftermath of the 10-year anniversary of Bitcoin, the cryptocurrency stalwart needs a helping hand. Unfortunately, while the market looks so weak the bulls seem to be sitting on the sidelines while the bears take centre stage.
One minor positive to take way from this week’s price-action is that USD Tether is back to $1, although a stablecoin re-finding its peg after weeks of needless fluctuation is hardly anything to celebrate.