Bitcoin Bails Again
It’s that time once again folks; the end of the week. As we wind down for the weekend it’s time to once again recap the week’s highs and lows, triumphs and failures. Chatting with traders this morning it seems the big move that most chart watchers and screen scrutinisers are talking about is the slump in Bitcoin. The ‘love it or hate it’ crypto icon extended its recent decline this week by shedding a further 16%. Bitcoin is now down almost 20% from its all-time highs printed earlier this month. So, let’s take a look at what caused the move and, as ever, if you caught the move? Well done! If not? There’s always next week.
What Caused the Move?
Pinning down the exact reason behind any one episode of volatility in cryptocurrencies is never straightforward. Firstly, as an asset class, cryptos are highly volatile to begin with. Secondly, because they are attached to no particular-economy and are not backed by any physical assets, they move simply according to supply and demand, making them even more susceptible to sudden moves.
USD Rally Weighs On Price
However, as the Bitcoin market becomes more and more developed and the currency grows in market cap, it is starting to take on more traditional currency characteristics. The decline this week can therefore largely be seen as a response to the rally in USD as US rate hike expectations have ratcheted higher.
The recent bumper set of US inflation and retail sales figures for October have once again turned the focus back to the Fed and the issue of tightening. Many players now judge that the Fed will be forced to tighten at a quicker pace than is currently scheduled and as a result we have seen a strong move higher in USD. As with other risk assets, Bitcoin has taken a heavy hit from this shift in dynamic.
Bullish Expectations Remain
However, the Fed has proved a tricky beast to track this year and just because the market is increasing its tightening expectations does not mean the Fed will follow through, potentially opening the way for USD disappointment in the near term, which would allow for a recovery in cryptos. On that note, it’s interesting to see that the third-largest registered holder of BTC in the world has been buying into the dip this week. So, that’s the fundamentals, let’s now take a look at the technical landscape.
Technical Views
Bitcoin
The recent rally into the 67720 level was accompanied by plenty of bearish divergence in momentum studies and the subsequent reversal has seen price trading back down into the bull channel. Price is now testing the 57805 level support. A break below here will put 52930 in focus, along with the rising channel low. If bulls can hold support here, however, the focus will remain on further upside.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.