Bitcoin fell below $3,500 as $5 billion was wiped out of the crypto market, and major digital assets like Ethereum recorded a six percent drop against the U.S. dollar.
The 4.8 percent drop in the combined valuation of all cryptocurrencies in the global market comes after a strong sell-off on January 11.
On January 12, prior to the three percent drop in the Bitcoin price, a cryptocurrency trader with an online alias “Hsaka” said that Bitcoin was showing a sign of weakness based on its performance from January 11 to 12.
At the time, the trader wrote:
Some thoughts. The first wick below the range low led to a tap of the range high. The second one (this current one) has failed to reach that high as of now. Sign of weakness in my opinion.
Since then, the price of BTC declined from over $3,700 to $3,476, by six percent.
One major issue in the performance of the crypto market in the last 48 hours is the low daily trading volume of most crypto assets including Bitcoin and Ethereum.
A sell-off during a period in which a market is demonstrating a low volume demonstrates a free fall without significant sell pressure. The lack of resistance may leave the market vulnerable to an extended drop in the short-term.
Josh Rager, a cryptocurrency investor, suggested that if the volume of the cryptocurrency market fails to recover in the upcoming days, a drop in the price of BTC to the low $3,000 region is highly likely given that solid buy walls have established below the $3,000 support level on crypto-to-fiat exchanges.
“As the volume continues to slowly descend Bitcoin could see more sideways ranging This could last for days or weeks until a decrease in buyers, currently holding up the market, at these levels. Nice support below $3,000 with lots of buyers waiting there,” he explained.
As Bitcoin struggled to show strength in a relatively low price range from $3,500 to $3,700, other major crypto assets in the likes of Ethereum, Bitcoin Cash, and EOS recorded an 8 percent, 7.5 percent, and 7 percent drop against USD, respectively.
Even TRON, which experienced large gains against Bitcoin over the past week due to some of the progress its foundation made in integrating a token into the BitTorrent protocol, experienced a double-digit fall on the day.
The cryptocurrency market may recover in a lower price range as large buy walls prevent bears from pushing the market below key support levels.
However, in the next few days, wild volatility is generally expected, and based on the performance of the dominant cryptocurrencies, the majority of digital assets in the global market could become vulnerable to short-term drops.
Overall, based on the performance of BTC throughout the past three days and the declining volume of the cryptocurrency exchange market, the asset class is showing weakness in many areas.
Featured Image from Shutterstock. Price Charts from TradingView.