2018 has proven once again that the coin market is unpredictable. Throughout the year, there have been predictions that the market would spike to values not yet recorded. None however foresaw the values we are seeing in the past few hours.
Several analysts were confident that Bitcoin would trade at values near $30,000 by December this year. Current market conditions have shown that possibility is not even remote.
In the past several hours, Bitcoin has traded at less than $4,300. Data feeds from exchanges that trade crypto to fiat show the effect of the recent free fall on the coin market.
Bitcoin as at Monday traded at $5,600 in a short rally that made it seem as if the coin would reestablish the stability it has exhibited in the past 3 months.
However, in the past 12 hours, the coin has dropped from $4,900 to $4,280 shedding 12 percent and bringing the value of the digital currency to lows not seen since this year.
Data from Coinmarketcap did not quite reflect the effect of the recent bleeding as shown by exchanges such as Coinbase and Kraken which have direct crypto to fiat trades.
The spot market data shows that Bitcoin has lost 23.5 percent of its value in the past 36 hours which begs the question why the coin is losing value contrary to expectations and prediction of several analysts.
The common belief in the crypto circles is that Bitcoin bottoms at $4,800. It seemed as if a consensus of sorts was reached at this determining this support.
A crypto analyst CryptoDog on November 19 spoke up on the market situation stating that there was no way the Bitcoin price would find support at that point making reference to the low volume of Bitcoin traded recently.
According to CryptoDog,
“$4800 was not a bottom by any means – my arbitrary line in the sand was the wrong arbitrary line. Judging by volume, we are still quite far from a bottom. So far this sell off has been relatively weak (volume wise). BTC / USD longs are rising, while shorts are barely touched. This dump has been straightforward spot selling, and no one is interested in buying.”
The low volume of Bitcoin has been a source of concern to many analysts despite the fact that the coin maintained reasonable stability not seen in years for the coin.
The unpredictability of Bitcoin was expressed in the belief of many analysts that the prolonged stability of the coin would herald a rally believed to be similar to the massive bull run of 2017.
Others felt that the right entry point for new adopters will be $5000. For instance, Allianz chief economic adviser Mohamed El-Erian told CNBC in June that the right time he would invest in Bitcoin is when the coin falls to $5,000.
According to El-Erian, there was little chance that Bitcoin would trade at $20,000 again in the near future. He chose the $5,000 entry point based on “gut feeling”.
[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]“I don’t think you get all the way back to $20,000, but I do think that you need to establish a base whereby the people who really believe in the future of Bitcoin consolidate and then that provides you a lift,”[/perfectpullquote]
His expectations were moderate it seems, in comparison with Bitcoin bulls it was way bearish.
Bulls such as Tim Draper predicted the coin would see values as high as $250,000 in 4 years. Others like Pfeffer Capital’s John Pfeffer were more conservative saying the coin will eventually trade at $90,000.
It is not certain that the predictions were based on hard data except that the coin’s history has shown that periods of lulls are usually followed by unpredictable spike.
In any case, it doesn’t seem as if anyone has anticipated that the price of Bitcoin would drop as low as $4,280 as we have seen in the spot market.
The analyst CryptoDog said that the situation has not taken volume into consideration, adding that trend reversal is a possibility at any moment.
His advice was,
“The bears aren’t even pushing, $BTC is just free-falling. Very weak dump, imagine what it looks like when the volume comes in. A short-term reversal could happen at any moment – shorting with high leverage is a terrible idea. However, if you are trying to knife catch, be patient. No one should be in a rush to long this.”
The good news is that the 32 percent drop in the past 3 days is not accompanied with high bear pressure. Neither have there been large hodlers exiting the market.
This raises optimism of a reversal soon or a short-term recovery. Investors should be aware also that the coin could drop further and test the $4000 region.
No matter the situation, the next few days will make the market situation clearer. If there is no short term recovery in days, Bitcoin price falls even below $4000.
Some investors are already complaining that with the recent market development that there is no incentive to buy.
Neil Wilson, the chief market analyst at Markets.com is of the opinion that,
[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]“Things looks like they only get worse from here. Where is the incentive to buy? It does rather look like the bottom is coming out of this market.”[/perfectpullquote]
The latest market downturn is coming in a year that has shown a lot of promise that institutional investors will increasingly adopt Bitcoin.
The World Bank and some central banks are also discussing central bank issued digital currencies.
None of these have reflected on the coin market in terms of high level of adoption that translates to demand and spike in the value of Bitcoin.
There are just two positions to take under the current market condition. You can bet on Bitcoin soaring in the long-term or plunging into the abyss. This present market may favor traders that are short on Bitcoin. However, history has shown that buying at low point s like this is advantageous Bitcoin bulls.
Trading View Analysis stated:
Again our long term outlook is bullish for Bitcoin’. If it takes 6 months or 2 years to retest 20k, our position is we eventually retest the previous high. If this takes 2 years to do, this is nearly a 200% annual return, based on current prices. Who wouldn’t like those kinds of returns? Only those who think they can out smart the market in the shorter term.
Image credit: Trading View, Coinmarketcap