Overnight, Bitcoin fell to the bottom of its long-established trading range, finding stability in the mid $6,300s. Analysts have previously explained that the longer an asset, especially a cryptocurrency, trades flat, the larger the proceeding move will be. Conceptually, this can be thought of as a spring slowly coiling, and when it is let go the more it is coiled the bigger its move will be.
The most recent drop is the latest to occur in the cryptocurrency markets since earlier this month, when Bitcoin fell from $6,600 to lows of approximately $6,200, before sharply rebounding a few days later to $6,800. This type of move has become increasingly common in the cryptocurrency markets, and there is a high chance that BTC’s latest price action could replicate this.
Prior to Bitcoin’s relatively small downward move, Mati Greenspan, a senior market analyst at eToro had expressed that a price movement was inbound due to increased trading activity and currency transfers, explaining that:
“There’s still reason to believe that the breakout we’ve been waiting for may be getting closer rather than further away. A quick look at blockchain’s data confirms that Bitcoin is getting busier lately.”
The downward move was also likely a result from increased selling pressure from the Korean markets. Greenspan also noted that when compared to major trading pairs (including the Pound, the Euro, the U.S. Dollar, and USDT) there was a dramatic surge in trading activity for the BTC/KRW trading pair, which likely resulted in overnight selling pressure.
Altcoins Trade Down Amidst Bitcoin Drop, Canadian Exchange Hack May Be a Small Factor
At the time of writing, Bitcoin’s drop has unsurprisingly led to an overall market decline, with most major altcoins trading down between 3-5%. Out of the top 10cryptocurrencies by market capitalization, EOS, Bitcoin Cash, and Litecoin have been the worst performers over the past 24 hours, all trading down between 4-5%.
Currently, the overall cryptocurrency market cap is sitting at over $203 billion, down from its weekly highs of $211 billion. When put into context, the latest drop is relatively small, and it is likely that the markets will either trade sideways or climb back up to continue ranging.
The only possible, albeit unlikely, external factor influencing the latest drop is the recent hacking, or exit scam, surrounding Canadian cryptocurrency exchange called MapleChange. The exchange announced on Twitter over the weekend that they had lost $6 million worth of BTC, and that they were closing their social media accounts and website until further information can be gathered.
Although news of potential exit scams like this can deter the market sentiment and degrade the image of the cryptocurrency industry, the relatively small amount lost on this exchange likely had little to no impact on the markets.
Investors and traders will likely have a better idea of how impactful the latest price drop will be long-term depending on how the market responds in the coming days.