The price of bitcoin has broken the $3,500 support for the first time this year leading to talks of a new 12-month low in the next couple of days. Bitcoin has maintained its value just above $3,500 for some time now since it corrected from a surprising surge past the $4,000 midway into the month. It has now dropped below that mark leading the entire crypto market with it.
At the time of writing, BTC is trading at $3,478 to the USD which is about 3.1 percent down according to data from CoinMarketCap although it reportedly went as low as $3,550 on some exchanges earlier on. The BTC market cap also dropped to $60.8 billion from $62.7 billion as at the same time yesterday.
Why the sudden decline?
Crypto analysts are having their take on the cause of this sudden price slide. From indications, this has more to do with technical factors rather the fundamental factors.
A 12-month Low on the Cards?
As originally reported by cryptocurrency news site CCN.com, crypto trader Josh Rager responded to the bitcoin drop stating that the drop below $3,400 after relative stability signifies a potential drop to a 12-month low.
He was quoted as saying:
“BTC continues to look weak. Eventually, alternative cryptocurrencies succumb to Bitcoin. If Bitcoin breaks and closes sub $3,445 area it will retest the 2018 lows if not, BTC continues its sideways action similar to the pre-capitulation at $6,000.”
Crypto rally is Not Guaranteed
Low prices usually attract miner and investors to accumulate coins which in turn could lead to a mid-term rally. But Alex Krüger, a notable economist and crypto analyst has quashed that thinking explaining that accumulating bitcoin will not necessarily raise prices later on.
In his twitter post. Krüger explained:
“For someone to accumulate, someone else has to distribute. It is a zero sum game. Accumulation per se is neither bullish nor bearish. With the current trading volumes, I’d bet on exchanges and miners currently ‘accumulating’. Eventually they will likely start dumping again.”
Bitcoin Expected to Determine the Crypto Market
Bitcoin Dominance is still more than half of the entire crypto market (precisely 53.3 percent) which indicates that it still determines the mood of the entire crypto market.
Why Bitcoin cannot afford to break the $3,000 Support
Cryptocurrency trader and self-acclaimed “master of the charts” have warned that if bitcoin continues towards $3,000 it could spell doom for the cryptocurrency. BTC reaches a yearly low of $3,150 in December last year before a remarkable rally that moved it above $4,000 in January.
“We need to pay close attention right now. If BTC falls about 5% lower to about 3300, it will be testing the ever important weekly 200 MA, which is what we bottomed on in January, and what forced the last bear market to bottom. If we close below that, things will get nasty.”
Some Analysts Say BTC Doesn’t Look Good in the short term
Earlier in the month, Vinny Lingham the CEO of blockchain startup Civic predicted a “things [will] get worse before they get better.” He told crypto news outlet Cointelegraph that he had a gut feeling that Bitcoin will likely go below $3,000.
Another such prediction came from Jimmy Song, a crypto analyst interviewed for Finder.com crypto market prediction report. In the predictions reported by Smartereum, Song said he expected Bitcoin to drop to $2,800 by the end of January.
Morgan Creek’s Anthony Pompliano in a rare note of crypto pessimism, projects a gloomy short-term outlook for bitcoin. He wrote :
“…lower lows in coming months, along with a bear market that could persist until Q3 of Q4 of this year.”
However, if bitcoin can stay above $3,400 for the next couple of days, traders are optimistic that it could avoid the plunge towards $3,000 and possibly rally.