Just within 24 hours, bitcoin fell from $9,200 to $8.643.80 and the industry expert has been warning the bitcoin uses about this for a while. According to some media outlets, this is a sign of buyer exhaustion and says that the bitcoin price could go even lower at $8,200-$8,000. Bitcoin is making attempts to pass the 200-day average at $9,027 if the cryptocurrency manages to hold the steady $8,461 value.
The cryptocurrency had a somewhat positive start to the year, seemingly after a long period of unpredictable jumps, bitcoin users were hoping for a steady couple of months. Instead, we got a 20% drop in the first month of the year.
Why This Drop Makes Sense
All throughout December, amidst the political tensions and natural disasters shaking up the world the financial industry was struggling to stay stable. Websites offering live forex trading along with cryptocurrency trading websites were left with very little insight about the future development of the events.
We saw major shifts in the market, even if the changes were short-lived and the tensions between the U.S and Iran were a big part of the boost that bitcoin got at the beginning of the year. So the last two months have been somewhat challenging and trying to the financial sector especially because while the markets are unpredictable and everyone is expecting a shift, they don't always shift in the expected direction.
Bitcoin has been experiencing 6 months of decline, even dropping as low as $7,000 before December of 2019. Despite the rise in the price at the beginning of the year, the crypto analyst has been warning that despite the trend the trading volume of bitcoin has been very low, in fact, the lowest it has been in almost a year, with the 90% drop in volume from its June high 2019.
Because of this, the industry experts were warning the users about the increased volatility of the market. And while the bulls see the price moving sharply higher in 2020, while possible, it is also likely that the increase in value won't be long-term.
While for the last couple of months have been better compared to the beginning of the year the major drop is an indicator of the bullish exhaustion. In order to prevent future unpredictability as much as possible, it is important to keep bitcoin at $8,461 in order to create some stability and to overcome the bullish exhaustion.
What Has Changed over the Last Year?
Currently, the trading volumes are almost back to the level they were at the beginning of the previous year, back when bitcoin was half the price it is today. But there are a lot of opportunities for change in the upcoming year that could take the cryptocurrency to its highest numbers. As the international tensions eased and the markets become more stable, the bitcoin will likely stabilize as well, but the more important event happening down the line is actually the launch of Facebook's cryptocurrency - libra that will reset the crypto industry.
Cryptocurrencies have had a very rocky year, while some countries are coming around to the idea of embracing them and allowing for the easier regulations for them, others simply don't want to deal with the complications and keep pushing bitcoin and other cryptocurrencies away with strict regulations, high tax rates and similar, discouraging activities.
It has become an ongoing battle for countries to try and make cryptocurrencies into something they can benefit from, without having to deal with the downsides of the industry. While some countries are more open to the idea of working around this concept another close off any opportunity for cryptos to thrive in their countries.
The challenges, the thefts, the major changes in regulations have all affected the cryptocurrency industry and the market, and as well are seeing by looking at the finishing conclusions about 2019, this affected the trade volume as well making the market more vulnerable and prone to drastic changes as we've already seen.
Understanding the Volatility of the Bitcoin Market
According to various media outlets the "drop" happened around 23;00, on when the day was coming to an end with a big bearish outside day candle, which means that while the day began in good spirits it ended on a negative note. This pattern is a well known bearish signal, but people usually wait for confirmation. Since the drop last week, bitcoin has gained 0.03%.
Right now it is crucial that the price stays above $8,500 because otherwise, another major dro might occur so maintenance of bitcoin at its current rate holds a lot of importance for BTC bulls. Bitcoin has bounced at $8,500 on a couple of occasions these past few days, indicating that the demand zone for the cryptocurrency in the near term. Since bitcoin has managed to stay double the price while having the same amount of trade volume as it did back when it was worth $4,000 it is safe to say that it has more capabilities now to sustain itself for a while and stay afloat even if at $8,500. But as mentioned above, bull exhaustion is temporary.
So pairing up the current capabilities of the market with the temporary nature of what largely causes the drop the following few weeks is looking more predictable and stable for cryptocurrencies. When the events like the launch of libra and the May halving, when the bitcoin takes away half of bitcoin that was rewarded to miners, we will be able to better predict the future ups and downs of the market.
Bitcoin, in general, has become more mainstream, meaning that there are more tools, more professionals able to analyze the market and to make sure that it doesn't cause too much trouble for anyone. Over the last two years, the amount of coverage that bitcoin gets has contributed to the increased general knowledge about the market and the possibility of unpredictable drops and how to deal with them.
This market drop while still substantial won't be able to cause long term disruptions. While still an inconvenience it is still salvageable and will help the users understand the market better.