Bitcoin erases February’s gains with massive plunge to $8,000
Natural market forces and PlusToken BTC movements combined to take Bitcoin on a wild ride.
Bitcoin has experienced a couple of fairly unpleasant days on the market, dropping from a seemingly comfortable perch at $9,000 all the way to $8,000 before its fall was arrested.
The price drop occurred over several large, staggered steps across the last 28 odd hours.
One theory for this drop, which is strongly supported by chart analysis, is that Bitcoin suffers from motion sickness. So, after bouncing off the $9,200 mark and lurching downwards, Bitcoin started feeling queasy. Unable to hold it in, Bitcoin then just threw up all over the place. And you know how hard it can be to stop once it's started.
As they say in the Pringle and gastrointestinal business – once you pop, you can't stop.
In less anthropomorphic terms, it looks like traders may have simply re-evaluated the market when Bitcoin failed so hard and so suddenly at the $9,200 resistance level and flipped the switch from bullish to bearish in a self-fulfilling prophecy.
This was probably exacerbated by news that PlusToken was moving more of its Bitcoin to market. PlusToken is a confirmed crypto Ponzi scheme that pulled in more than $100 million of Bitcoin. It's been known to push Bitcoin prices down by selling off chunks of its hoard.
The chart below shows Bitcoin prices in blue and the altcoin market cap in orange. We can clearly see Bitcoin's repeated bouts as well as the way altcoins tend to both rise and fall more dramatically than Bitcoin itself.
Beyond PlusToken, there are other reasons why the markets would naturally take a tumble here.
Firstly, Bitcoin has a history of bouncing off resistance at $9,200. It's reasonable to expect sellers to come to market at that point. Secondly, Bitcoin had fallen into a fairly tight trading range in the few days immediately preceding that stab at $9,200, and analyst folklore holds that this kind of thing usually heralds sudden, large movements either up or down.
Put that together, add a sprinkling of PlusToken, and you have a good recipe for Bitcoin to do exactly what it did. Pulling back to the six-month chart helps put this in perspective.
Here we can see that Bitcoin is no stranger to resistance at $9,200. We can also see that this particular drop is pretty darn big. Just like that, the last two days have tidily erased all of February's gains. But this movement still pales compared to Bitcoin's titanic swings in October 2019.
This is perhaps a good time to circle back to two fundamental obstacles that could be preventing Bitcoin from going parabolic right now: a lack of liquidity and a surfeit of selling pressure.
It's easy to blame PlusToken for keeping Bitcoin prices down and to write it off as a temporary issue, but the real problems are much more fundamental to Bitcoin. The markets lack liquidity and there are sellers around every corner just waiting to ditch their Bitcoin when the price is right. Those problems will likely still be there once PlusToken has finished dumping its holdings.
Perhaps it wasn't just motion sickness that left Bitcoin feeling queasy. Maybe it's just the general unhealthiness of Bitcoin's markets.
Disclosure: The author holds BNB and BTC at the time of writing.
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