On April 10, the bitcoin price achieved a new 2019 high at $5,450 in major markets including the U.S., accompanied by an increase in demand for bitcoin from accredited investors.
Consequently, the premium of the Bitcoin Investment Trust (GBTC), a regulated bitcoin investment vehicle overseen by Grayscale, a cryptocurrency investment company with $1.2 billion under management, surged to 10 percent.
However, within minutes, the bitcoin price slipped from over $5,400 to $5,200 and in less than 12 hours, the asset fell by nearly 4 percent to $5,170.
Bitcoin Fall Was Mostly Technical
On a daily basis, bitcoin is only down about 1.2 percent and on a weekly basis, the asset is still up 6.8 percent as it added $332 since April 5.
Throughout the past two weeks, ever since bitcoin initiated its initial 20 percent rally from $4,200 to $5,000, it has shown several minor retracements in the 1 to 5 percent range.
On April 4, for instance, after BTC surpassed $5,261, it dropped by more than 7 percent.
The dominant cryptocurrency is likely facing some retracements as it engages in an upside movement because of the presence of resistance levels above the $5,000 region.
When bitcoin first broke out of $4,200 earlier this month, it was considered as a major resistance level and above $4,200, there was less resistance and as such, BTC moved to the $5,000 mark relatively fast.
As said by economist and global markets analyst Alex Krüger, bitcoin faces resistance at $5,300, $5,500, $5,750, and $6,000, all of which need to be tested in a technical sense for the asset to engage in another rally.
Similarly, trader and technical analyst Luke Martin said that the $5,500 mark is considered to be a relatively strong resistance level for bitcoin and in the near-term, the asset would need to break out of it to recover beyond $6,000.
“For the first time since $1,000 BTC breakout on Apr 1st, [the bitcoin] price is reaching an area that I expect to act as resistance. It’s the only area price paused at after the dump from $6,000.”
As bitcoin fell, other crypto assets fell with intensified movements. Ethereum recorded a loss of over 6.9 percent, XRP fell 5.2 percent, and Bitcoin Cash dropped nearly 8 percent.
What Are Potential Triggers of Bitcoin?
If the price of bitcoin dropped as soon as it neared a key resistance level at $5,500, it suggests that the asset would need a set of solid catalysts to move it past the $5,500 level and to the $6,000 region.
In the short-term, an inflow of capital from institutional and accredited investors through vehicles in the likes of GBTC and the CME futures market could drive the demand for bitcoin up.
On April 4, the CME bitcoin futures market nearly doubled the daily bitcoin spot volume in March and that sort of volume is sufficient to have an impact on the value of the asset.
In the medium-term, developments in the cryptocurrency industry such as Coinbase’s U.K. and EU crypto debit cards could raise the confidence of investors in the asset class.
The Coinbase Card enables customers in the U.K. and the EU to spend cryptocurrencies like bitcoin “as effortlessly as the money in their bank,” and considering the lack of success of companies in maintaining Visa debit card operations in the past, it could be considered by investors as a positive step towards adoption.
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Last modified: March 4, 2021 2:44 PM