Bitcoin Breaks out of “Price Range” and gives into Pressure
The price movement since last Wednesday has mainly traded within a “price range” between $16,644 and $16,235. However, the price this morning has formed a bearish breakout reminding traders of the continued downward pressure. The cryptocurrency market has changed significantly since the 7th of November. This includes the price action, price influences and correlation.
The strongest decline seen over the past week was experienced during this morning’s Asian session, where the price against the US Dollar declined by 3.14%. The price found support as the instrument declined below $16,000 and then formed a retracement correcting by 1.05%. The asset has been slightly supported by a higher risk appetite and weaker Dollar, but still remains pressured by the latest FTX developments.
Since Friday, the cryptocurrency market capitalization has declined again from $825 to $819 Billion and the total volume for this morning’s Asian and European Session is $44 billion. The daily volume has increased by 23% which shows orders continue to be placed and the week ahead may be volatile. The total market share of Bitcoin has again declined for a consecutive week to 38.03%.
Bitcoin and Technical Analysis
When looking at technical analysis, most indicators and theories are pointing to the price continuing a downward trend. Indicators are signaling bearish movement in the medium term with a possible correction in the short term. The price at the moment is trading below most average price movements and Volume Weighted Average Prices. In addition to this, most moving averages have also all crossed downwards. The RSI only gave an oversold indication below $16,000 on timeframes below 2-hours.
The question is how low is the sector likely to fall before obtaining serious requests from buyers? Of course, analysts have different opinions and predictions. According to Bloomberg, most analysts and cryptoexperts believe the price will decrease to $13,000 at best and $7,000 at worst.
Bitcoin/US Dollar 30-Minutes Chart on November 28th
Bitcoin, FTX and the Market going Forward
So what is the concern and why is the price predicted to decline further? Well, even before the FTX developments, the cryptocurrency market was under immense pressure from interest rate hikes, high inflation and lower risk appetite. Though the FTX bankruptcy brought investor confidence and the risk appetite to a whole new low. The bankruptcy of the FTX platform resulted in millions of Dollars being lost by creditors and liquidity problems for other companies within the industry. According to Bloomberg, this includes Galaxy Digital and Sequoia Capital. FTX has advised they will return at least part of clients funds through the sale of FTX assets.
Bitcoin/US Dollar 6-Hour Chart on November 28th
On the positive side, the industry has positively reacted to safeguarding and regulations in favor of protecting investors. Many experts and market participants have already voiced the need for safety and confidence in the system. For example, segregated accounts and insurances. Most financial institutions around the world including members of the Bank of Japan, Janet Yellen and the Bank of England have advised the need to regulate the market in ways which will not disrupt the nature of cryptos.
In addition to this, the Chinese Authorities are going a step further testing their own cryptocurrency. Last week the authorities confirmed further testing of CBDC. According to reports, 7 million citizens will receive the token and will be able to spend within the country even if the shop is a foreign franchise such as Mcdonalds. Traders are hoping this activity can slightly improve demand for digital currencies, especially at the current discounted price.
In conclusion, we can see the pressures on the price is deriving from rate hikes, high inflation and of course the FTX bankruptcy. However, investors are hoping further innovation, a lower price and also a more dovish central bank may support demand within the first quarter of 2023.
Risk Warning: Cryptocurrencies are highly volatile and trading can result in the loss of your invested funds. Before investing, you should be aware that cryptocurrencies may not be suitable for all investors. You should therefore carefully consider whether trading or holding digital assets is suitable for you in light of your financial conditions and not invest money that you cannot afford to lose.