On December 14, following a fairly large sell-off from the $3,400 region, the Bitcoin price dropped to a new yearly low at $3,200.
As Bitcoin (BTC) declined in value, other major cryptocurrencies including Ethereum (ETH), Stellar (XLM), and Bitcoin Cash (BCH) experienced large losses against the U.S. dollar, with BCH falling by more than 11 percent.
Within a seven-day period, the Bitcoin Cash price` has fallen from $116 to $89 by more than 25 percent despite dropping nearly half of its value the previous week.
Prior to the four percent drop in the value of BTC, a cryptocurrency trader with an online alias “The Crypto Dog” suggested that it may be a risky period to initiate trades on the short-term trend of the dominant cryptocurrency due to its volatility in a low price range.
Following the weak performance of BTC on the day, the trader said:
“BTC lowest daily close year to date. Is there still a chance of recovery before more lows? Well, maybe. But I am not betting on it.”
Another prominent technical analyst DonAlt echoed a similar sentiment and said that until the price of Bitcoin breaks out of major resistance levels at $3,600 and $3,800, it is of significant risk to enter a long position on the short-term trend of BTC.
“Closed below the swing low – harsh rejection followed. There isn’t much support on the daily time frame still. So far prior support areas have flipped into resistance. Until that changes – stay away from longs,” the analyst said.
Over the past six months, the vast majority of major cryptocurrencies and ERC20 tokens have fallen by 50 to 80 percent against BTC, which fell by nearly 85 percent on its own. For Bitcoin to drop by a similar magnitude as Ethereum, for instance, it would have to drop an additional 72 percent from its current price.
As Bitcoin struggles and as venture capital firms back away from the cryptocurrency sector amidst falling prices, the asset will likely not be able to initiate a breakout above the $4,000 mark in the upcoming weeks.
Already, BTC has been able to maintain the range of $3,000 to $4,000 for over three weeks, from November 24. Until the asset begins to demonstrate signs of a multi-month consolidation period and a high level of stability, a gradual recovery in price and volume could be unlikely.
This week, Barry Silbert, the founder and CEO of large-scale cryptocurrency-focused venture capital firm Digital Currency Group (DCG) said that venture capital firms have started to pull out from deals with companies in the crypto sector.
“We’ve seen half a dozen fundraising deals fall apart over the past month after the lead pulled out. All is not well in crypto VC investor land Good time to remind founders that a signed term sheet does not equal cash in the bank.”
As prices of crypto assets drop and venture capital firms hold out, additional investments are unlikely to be made until the market starts to recover.
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Featured Image from Shutterstock. Charts from TradingView
Last modified: June 14, 2020 9:35 AM UTC