In the last 24 hours, the Bitcoin price has dropped from $3,505 to $3,322 by more than five percent against the U.S. dollar.
The abrupt decline in the Bitcoin price led the valuation of the crypto market to plunge by over $10 billion in a three-day span.
Major crypto assets such as Bitcoin Cash (BCH) and EOS (EOS) recorded large losses throughout the past week and was surpassed by Tether (USDT) in market valuation.
Dropping Below $3,000 is a Possibility For Bitcoin
Throughout the past three months, despite recording intense sell-offs at times, Bitcoin has defended the $3,000 support level with strength on multiple occasions.
However, traders generally see weakness in the short-term trend of Bitcoin and in the upcoming weeks, the dominant cryptocurrency is likely to extend its bearish sentiment.
A cryptocurrency trader with an online alias “Mayne” stated that Bitcoin could drop by another 50 percent from its current price if it fails to hold the $3,000 level.
“All bear market my feed is ppl getting bullish at lower highs and bearish after dumps. $BTC could drop another 50% from here but most of you are better off sitting out or waiting for longs. The time to short bigly was all last year. Daily close looks good if this level holds,” Mayne said.
Some analysts suggested that no strong supports were formed below $3,000, which may leave the asset vulnerable to a steep decline if it falls below key support levels in the short-term.
Chris Burniske, a partner at Placeholder, a major cryptocurrency venture capital firm, stated that “smart money” is observing the price trend of Bitcoin and big buy walls could form if Bitcoin dips below $3,000.
Similarly, in mid-December, large buy walls emerged on fiat-to-crypto exchanges in the likes of Coinbase and Bitstamp as Bitcoin dropped to a 12-month low at $3,122.
Burniske suggested that many investors are trying to catch the bottom of the asset in the high $2,000 region.
Regardless of whether BTC breaks up or down, there are a lot of big buyers watching closely. A lot of smart money is hoping to nail a bottom (likely in the high $2000s, just cracking $3K, before popping back above 200 week SMA), or come in quickly when there’s significant consensus that the bottom is in & situation is de-risked.
Since January 18, Bitcoin and other major crypto assets have demonstrated a weak short-term price movement. BTC is en route to falling to its 12-month low at $3,122 but it remains uncertain whether buy walls in low $3,000 will be sufficient to lead the asset to recover.
Overall Negative Sentiment, Bearish Period
In regard to the price trend of cryptocurrencies, the majority of investors in the crypto market remain negative and bearish for the right reasons.
Technical indicators demonstrate a lack of momentum in both major crypto assets and low market cap cryptocurrencies.
Apart from Bitcoin and Ethereum, the daily volume of most cryptocurrencies remains relatively low in comparison to previous months.
But, Coinbase chief technical officer Balaji Srinivasan stated that while it may be winter for crypto markets, in terms of innovation and developer activity, the cryptocurrency sector is flourishing.
Public blockchain networks such as Ethereum, Bitcoin and even stablecoins have seen noticeable improvements in various areas including scalability and privacy.
“It may be the crypto winter for price, but it feels like the summer for innovation. Decentralized lending, interest, derivatives, prediction markets, Lightning and L2, zk-SNARKS/STARKS, bulletproofs, staking, stablecoins…lot of good things happening across the ecosystem,” Srinivasan noted.
Past studies have revealed that developer activity is the most accurate indicator of the price trend of cryptocurrencies. If companies and projects continue to drive innovation in the space, in the long run, it is likely to have a positive impact on the long-term recovery of the asset class.
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Featured Image from Shutterstock. Price Charts from TradingView.