On August 4, after rebounding from $7,200 to $7,500, the price of Bitcoin fell below the $7,000 mark for the first time since July 18.
Over the past three weeks, from July 18 to August 4, the price of Bitcoin has been relatively stable in the $7,200 to $7,500 region, recording limited volatility in the range of $300.
Join CCN for $9.99 per month and get an ad-free version of CCN including discounts for future events and services. Support our journalists today. Click here to sign up.
However, on August 4, for the first time in three weeks, the price of Bitcoin fell to $6,955, below the key $7,000 resistance level, as a result of a large sell-off on major cryptocurrency exchanges.
What Caused the Fall?
Bitcoin and the rest of the crypto market undoubtedly had one of the best weeks in history in terms of merchant adoption and institutionalization of digital assets, given the announcement of the New York Stock Exchange (NYSE), Microsoft, and Starbucks to create a cryptocurrency exchange and to accept digital assets as a payment method.
Maria Smith, vice president of partnerships and payments for Starbucks, said:
“As the flagship retailer, Starbucks will play a pivotal role in developing practical, trusted and regulated applications for consumers to convert their digital assets into US dollars for use at Starbucks. As a leader in Mobile Pay to our more than 15 million Starbucks Rewards members, Starbucks is committed to innovation for expanding payment options for our customers.”
Previously, former Starbucks Chairman and CEO Howard Schultz said that Bitcoin and other major cryptocurrencies in existence cannot be considered as legitimate currencies and a major asset class due to the lack of support from merchants and retailers.
Following the logic of Schultz, if Starbucks integrates crypto into its payment system utilized by tens of thousands of its stores worldwide, it will bring the biggest coffee retailer to crypto, firmly establishing digital assets as a recognized form of payment.
Still, despite the positive news coming from the US market, the price of Bitcoin has fallen to its monthly low. While the majority of analysts are yet to provide a reason behind the fall of Bitcoin, it is likely that the over-the-counter (OTC) market, which Tabb Group, a research firm in the US, said to be two to three times larger than the size of the cryptocurrency exchange market.
If the findings of Tabb Group are accurate, then positive news and developments in the cryptocurrency sector will only impact short-term traders in the exchange market, which accounts for less than 30 percent of the entire cryptocurrency market, increasing the probability of the OTC market and its unusual behaviour causing the market to fall with large sell orders liquidated.
Where Does Bitcoin Go From Here?
Due to the overly strong downtrend of Bitcoin, it is highly likely that Bitcoin test a major support level at $6,800, possibly $6,500 if the volume of the market fails to support a short-term corrective rally. While some investors have claimed that Bitcoin could bottom out in the lower region of $6,000, most of the predictions that have emerged in the past few hours are a result of recency bias, and investors will need to observe the market to understand the nature of its recent drop.
Featured image from Shutterstock. Charts from TradingView.