Bitcoin prices have fallen sharply lately, extending their recent losses and pushing the digital currency below $6,000 for the first time this year.
The cryptocurrency declined to as little as $5,678.14 around 6:45 a.m. EST, CoinDesk data shows.
At this point, bitcoin was down roughly 29% from yesterday’s high of $7,984.60, additional CoinDesk figures show.
[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.]
The world’s most prominent digital currency is certainly not the only asset that has been having a hard time lately.
At the time of this writing, all of the top 10 cryptocurrencies listed on CoinMarketCap were in the red.
Stocks were also suffering, as the benchmark S&P 500 index was down more than 6% for the day at the time of this writing, Google Finance data shows.
Bitcoin’s Recent Price Drop
Denis Vinokourov, head of research for London-based digital asset firm Bequant, noted that the market has declined “sharply” in the last 24 hours, with bitcoin falling more than 20% in an environment characterized worries about coronavirus, U.S. President Donald Trump’s latest travel restrictions and panic-driven selling.
He noted that the desire of investors to sell off their holdings triggered “a liquidity crunch as the cost of capital spiked up across trading venues.”
“This tightening was exacerbated by the fact that the market is highly dominated by sell-side liquidity providers/market-making firms, with only a limited buy-side demand,” added Vinokourov.
Safe Haven Concerns
Because bitcoin has been falling during times of widespread concern over the coronavirus pandemic, “many are disappointed” that the digital currency “has not been acting as the ‘safe haven’ it was promised to be,” said Kiana Danial, CEO of Invest Diva.
“However, a quick look at gold prices shows that even gold has not been able to live up to its ‘safe haven’ standards as it has dropped dramatically over the past few days,” said Danial.
She elaborated on this situation, stating that:
“To me, this simply suggests that Bitcoin has been caught in the Coronavirus global turmoil along with all other assets where investors are no longer looking to invest at all and prefer to hold cash in case of a doomsday scenario.”
While bitcoin has suffered some notable losses lately, the digital currency could recover soon, according to technical analysis provided by a handful of experts.
“Bitcoin is currently trading in a very strong support zone between $5,600 and $6,200 and is likely to bounce back from here,” said Joe DiPasquale, CEO of cryptocurrency hedge fund manager BitBull Capital.
Danial offered a similar perspective, stating that “the Fibonacci retracement level tracing the uptrend that started in February 2019 and ended in June 2019, suggests the current support level is at around $5,700.”
“This level also falls on a previous resistance back in April 2019 and acted as a support multiple times in 2018 and 2017,” she noted.
While bitcoin may have strong support, “the coming week will be crucial in establishing a floor for this recent drop,” said DiPasquale.
“If Bitcoin closes below $5,500, then $5,000 would be tested very quickly,” he stated.
“The upside, on the other hand, remains limited to $6,500 and $7,000 for now,” concluded DiPasquale.
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether and EOS.
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