The Bitcoin market had a crash that decreased its price by almost USD 3,000. These are the reasons behind what happened.
The supply available in the surroundings of USD 19,000 caused a crash that has caused losses of a little over 15%. For that reason, bears have taken control of the short-term price of Bitcoin.
At the time of writing this article, BTC is trading at USD 16,556, with a 1.98% loss in just 24 hours.
Although it Looks like a Crash, It Is Only a Bitcoin Technical Correction
Bitcoin was about to reach a new all-time high, but that push was not enough.
The weekly chart indicates a very developed bullish momentum that has been rising continuously. This rally stopped in the resistance zone that the previous high left.
The 8-week exponential moving average (EMA) and 18-week simple moving average (SMA) crossed to the upside. Besides, the price was moving further away from them in a parabolic movement.
The correction that is beginning may lead these averages to act as dynamic supports. The reason for this is that the previous trend is still totally bullish anyway.
Supply Exceeds Demand at a High Point
BTC has reached a very relevant supply zone, close to USD 19,000. The big ones were very likely to make a profit, but it looks as though they were much bigger than expected.
Bitcoin seemed to be on the verge of reaching an all-time high before having a setback. However, what started as a crash could be the start of a deeper correction.
When momentum was very developed, bulls’ weakness was evident, and the price was quite high. For that reason, whales decided to deposit some of their coins on exchanges to take profits.
As a consequence, there was an increase in the Bitcoin balance on exchanges, tipping the scales towards the supply side. This indicator continues to rise, which usually suggests a bearish signal.
Small Factors Expand the Storm
When the price of an asset like Bitcoin is at a peak, the odds are that a correction is very likely, and everything starts to go wrong.
On his Twitter account, the Coinbase CEO began talking about rumors that the US Department of the Treasury was planning to track down cryptocurrency wallet owners. This occurred on November 25th, before that rapid Bitcoin price crash began.
OKEx, one of the largest exchanges, recently announced that it would reinstate withdrawals at 08:00 UTC. They were frozen for five weeks since one of the exchange’s private key holders was cooperating in a police investigation.
Most of those frozen Bitcoins had already risen by around 70%. According to the CEO of CF Benchmarks, there were many unrealized gains on the exchange.
Despite Everything, Bitcoin Is Still Bullish
The current drop in the price of Bitcoin is nothing more than a healthy correction. Although a decline of USD 3,000 seems to be a lot, it does not represent anything for the cryptocurrency given its volatility and its price at the time.
Even in the face of less long-term resistance, it remains at the top. The current drop is nothing but noise compared to the historical trend of this crypto asset.
Institutional participation in the Bitcoin market continues to grow since macroeconomic factors continue to encourage it. This drop will help strong hands take advantage of discount prices, starting new momentum shortly.
By Willmen Blanco
