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Bitcoin is turning negative again. And the technicals aren’t looking too good either going into 2019.
The largest cryptocurrency slumped as much as 5.9 per cent to $US3,668.09 on Wednesday, approaching the more than one-year low of $US3,522.58 reached on November 26.
After a few days of relative stability, volatility has increased again in the wake of November’s plunge, which was the biggest monthly drop in over seven years.
Looks like there’s more pain ahead for Bitcoin in 2019.
Credit: Bloomberg
Bitcoin is caught in a strong selling trend — its most pronounced since the sell-off it underwent mid-year, when the price tumbled from about $US9,300 in May to around $US6,600 in July, according to the Directional Movement Index. Advertisement
If that plunge is an indicator of how things might play out, then Bitcoin could be in for a continued rout.
Prices for Bitcoin and other cryptocurrencies are likely to weaken, with Bitcoin falling to around $US1,500, said Bloomberg Intelligence analyst Mike McGlone in a note on Wednesday.
That would imply an additional drop of 60 per cent in Bitcoin’s price from its current level.
Bitcoin has fallen close to 80 per cent from its December 2017 record high when it hit $US19,511.
‘There’s little to prevent fading Bitcoin prices from reaching the continuous mean of $US1,500,’ wrote McGlone. A rush to the exits among investors seems to be in place, he said, attributing it to the Bitcoin Cash split and selling related to year-end tax purposes, among other things.
Cryptocurrencies have seen a massive sell-off in the last month, with the largest tokens shedding billions in market value since Bitcoin Cash forked in November.
That came as two software-development factions failed to agree on a way to upgrade the offshoot of the original Bitcoin, leading to a computing power arms race. Loading
“We’re at a classic psychological stage where the market is reversing the 2017 frenzy,” said McGlone in an interview.
“The hard fork was a key trigger that signalled the technology is way too nascent. You had these dicey characters threatening to destroy each other and institutions said ‘It might be best if we stay away from this for a while’.”
The Securities and Exchange Commission has also cracked down on the crypto space, fining two companies last month that hadn’t registered their initial coin offerings as securities.
And the head of the SEC said last week that concern over a lack of investor protections makes it unlikely that the agency will approve a Bitcoin exchange-traded fund anytime soon, something Bitcoin bulls have been pining for all year.
Bitcoin is down more than 40 per cent in the last month and November marked its biggest monthly decline in more than seven years. XRP, the cryptocurrency also known as Ripple, is down nearly 30 per cent in the last month.
Lower prices, however, indicate reduced speculative excesses and are helping to reduce volatility, said McGlone. “But the trend this year is clearly sustainable — it’s a positive trend,” he said.
“The trend is lower prices, lower volatility, reduced speculation, and the preponderance of stable coins,” he said, referring to tokens designed to minimise volatility in prices. Until then, cryptocurrencies have to find a base to see more stability and ‘we’re not near that base yet.
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Bloomberg.
