Abandon All Hope, Bitcoin is Rekkt

  • Bitcoin dives sharply on thin volumes in weekend trading but correction is nowhere close to the bigger swings experienced in the past 
  • Crash for Bitcoin may have been due to alleged regulatory action against financial institutions using cryptocurrencies for money laundering, as well as possible run-up in Dogecoin into the weekend being seen as a sign of a bubble 
Barely days after reaching a fresh all-time-high, Bitcoin came crashing down over the weekend, falling by as much as 15% at one point before paring losses.
 
As mentioned before, weekends are when Bitcoin is most susceptible to large swings in price given thinner trading volumes and with most institutional traders not at their desks.
 
Some online reports have attributed the plunge in Bitcoin and Ether to speculation that the U.S. Treasury department may crack down on money laundering that’s been conducted through cryptocurrencies.
 
And while Bitcoin hit close to US$65,000 ahead of the direct listing of Coinbase Global on Nasdaq Wednesday, both Bitcoin and Coinbase Global struggled towards the end of the week.
 
The plunge in Bitcoin lured bargain hunters however and Bitcoin quickly recovered some of its losses, but is still well off its most recent high.
 
For technicians, US$60,000 continues to be a strong level of resistance for Bitcoin as is US$65,000 and according to a Singapore-based Bitcoin trader,
 
“I’m ideologically aligned to Bitcoin, but at US$60,000, I’m a seller.”
 
Some have also attributed the crash in Bitcoin to the relentless rise of Dogecoin.
 
Created as a joke which has been boosted by the likes of Elon Musk and Mark Cuban, Dogecoin rallied over 110% last Friday before crashing the next day – prompting some to speculate that the joke has been taken too far and dragging other cryptocurrencies down with it.
 
Seasoned cryptocurrency traders however point to the fact that volatility, particularly weekend volatility, is par for the course.
 
Moves of 20% for Bitcoin are relatively common and since 2011, Bitcoin has had 16 crashes of more than 30%, with four crashes of over 80% – this weekend’s crash of Bitcoin hardly registers in the grand scheme of things.
 
But the crash will also attract more attention because there has been growing mainstream acceptance of cryptocurrencies which had recently spurred Bitcoin’s rally to new highs.
 
Institutional interest has also helped to lower the volatility for Bitcoin, and many have looked to their participation as providing a moderating force for Bitcoin’s price.
 

But this weekend’s Bitcoin crash serves as a reminder that no matter how many institutional investors buy into Bitcoin, it still remains at its core a highly speculative and volatile asset.

 
 

Novum Digital Asset Alpha is a digital asset quantitative trading firm.

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The information and thoughts laid out in this analysis are strictly for information purposes only and should not be regarded as an offer to sell or a solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be in violation of any local laws.

It does not constitute a recommendation or take into account the particular allocation objectives, financial conditions, or needs of specific individuals.

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