Bitcoin is making headlines once again as it continues to slide after testing the $50,000 price level on Monday. Many expected it to continue rallying towards its previous all-time high but instead, it seems to be pulling back and losing some of its gains. However, its current price action is a good thing because it is a much-needed price correction after the strong rally it achieved in the last three weeks.
Bitcoin is currently trading at $47,560 after tanking by 3.25% in the last 24 hours, although its 7-day performance indicates that it is still up by almost 6%. The pullback is normal considering that it was already in the overbought territory when it reached $50,000 earlier this week, and it was inevitable that some traders would take profit at that level.
Bitcoin remains the dominant cryptocurrency and as such, it still has a significant impact on the altcoin market. This influence has resulted in the global crypto market cap drifting down to $2.03 after a 4.83% decline. Meanwhile, BTC’s technical outlook is still favorable. The cryptocurrency crossed below its 7-day moving average during yesterday’s trading but there was a bullish attempt to get back above the MA. It experienced weak buying volume in the morning and it is comfortably below the overbought zone, suggesting that it might experience some recovery if the market sentiment allows it.
The stock market has a significant impact on the cryptocurrency market and the recent dip in crypto prices is a great example. Many institutional investors had executed short positions on some stocks expecting that COVID-19’s Delta variant and concerns about inflation would continue to hurt the stock market. However, the stock market experienced a significant uptick especially during yesterday’s trading session following reports that the FDA had approved a new COVID-19 vaccine developed out of a Pfizer and BioNTech collaboration.
Some institutions had to increase the size of their positions to cover the margin call and avoid being liquidated. Many therefore chose to sell their BTC holdings so they could access enough equity to cover their stock trades. This explains the outflows that have been happening in the crypto market considering that there has not been any FUD-inducing news affecting cryptocurrencies.
Bitcoin is holding steady at its current price level suggesting that there has been very little panic selling or perhaps there has been a lot of accumulation holding off the impact of weak hands exiting and those being liquidated from leveraged positions. The overall market sentiment remains bullish especially after the recent reports in which banks expressed concerns about the likelihood that top cryptocurrencies will replace the U.S dollar.
Regulation is a hotly debated subject that has a huge impact on cryptocurrency prices. It was a hurdle that the market had to face before the current bull run began towards the end of July. The market still has some room for growth before Senate resumes and continues on its crypto regulation agenda. This is expected to happen in September, but a lot might still happen between now and then. Bitcoin still has some potential upside but investors should exercise caution due to the market’s highly volatile nature.
Sydney has 20+ years commercial experience and has spent the last 10 years working in the online marketing arena and was the CMO for a large FX brokerage.
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