Bitcoin Falls Back Under $7000
Bitcoin rose to an intra-day high of $8,486 and close of $8,396 on July 24 after rebounding from its recent low close of $5,871 on June 28 and its intra-day low of $5,538 on July 2. However, since Tuesday Bitcoin has fallen over $1,000 to just under $7,000 on Saturday.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
[Author’s note: There is no official price for Bitcoin, so I use round numbers and reference Yahoo! Finance data.]
There have been two distinct downturns in the past five days, both of which could be due to a very large Bitcoin trade going south and leading to a large number of the cryptocurrency hitting the market.
On Friday, August 3, OKEx, a Hong Kong Bitcoin exchange announced that it had frozen a clients account due to the client initiating “an unusually large long position order (4,168,515 contracts).” This happened on July 31 and with each contract worth $100 this was almost a $420 million position.
OKEx said, “Our risk management team immediately contacted the client, requesting the client several times to partially close the positions to reduce the overall market risks. However, the client refused to cooperate, which lead to our decision of freezing the client’s account to prevent further positions increasing. Shortly after this preemptive action, unfortunately, the BTC price tumbled, causing the liquidation of the account.”
This seems to be at least one of the reasons that Bitcoin fell from around $8,100 to $7,500 on Tuesday . If OKEx wound up dumping a large number of Bitcoin’s on the market it could have created the downdraft.
Bitcoin then traded between $7,350 and $7,600 for the rest of the week until Saturday, when it has fallen to just under $7,000. This second downturn could be related to OKEx’s press release about what it had to do. Given the highly volatile nature of the cryptocurrency market, concerns about “whale” trades and hacking it wouldn’t be unreasonable to see sellers lighten positions and there be a buyers strike.
Downtrend may still be in place
Bitcoin had broken its sharp downtrend from its December 2017 $20,000 high when it turned back up in early July as can be seen in the long blue line. However, with this recent pull-back, another downward trend line may be in place .
Analyst had been looking for a pull-back
Rob Sluymer, Fundstrat Global Advisor’s Technical Strategist, had been looking for a short-term pullback since Bitcoin was approaching its next resistance level of $8,591. The cryptocurrency obliged but it has fallen below Sluymer’s support level of $7,400 to $7,800. However, I don’t think Sluymer would have counted on the support levels to stop Bitcoin’s downturn when an event such as what seems to have happened at OKEx occurs. An overbought condition can also be seen in the previous chart’s top portion by the bubble in RSI, or Relative Strength Index.