As traders on social media toss Bitcoin (BTC) away for the new cooler toys such as Torchlight Energy (TRCH), Clover Health (CLOV) and AMC Entertainment (AMC), the cryptocurrency has seen its price drop sharply, continuing it's wild ride.
Since about late October of last year the price of Bitcoin has soared from less than $12,000 to to more than $60,000 in April before falling back to roughly $32,500 as of June 21. The surge was fueled by Redditors betting on the crypto and then promotion from celebrity billionaires, chief among them the almighty Elon Musk.
What’s Affecting Bitcoin
However, since those highs set back in April, Bitcoin has been on a rough journey, dropping below $30,000 at times. Some bearish news came when Tesla (TSLA) sold some of its holdings and later when Musk announced that the electric car manufacturer would no longer accept Bitcoin as payment for vehicles.
The currency really initially started its pop back in October when news that platforms such as Paypal would start accepting it as and then more companies, including Tesla, started taking it as well. Musk cited environmental concerns as the primary reason for no longer accepting Bitcoin, but the downward trend at the time for Bitcoin probably played a large role as well.
While Musk’s wavering support of the currency hurt Bitcoin’s value, trends on Reddit and among meme traders may have had a larger impact. Sure maybe some YOLO traders moved off Bitcoin as a result of Tesla's announcement and downward trend but the more likely culprit of Bitcoin’s recent fall is… Dogecoin (DOGE).
Bitcoin hit it's all time high just as Dogecoin started to take off. In fact, on April 16 Bitcoin fell from the high it set the day before while at the same time, Dogecoin experienced its largest daily gain in price (not percentage) ever. Many meme stocks and other crypto currencies seemed to gain from Bitcoin’s fall with even Ethereum skyrocketing in price shortly after Bitcoin set its high. MicroVision (MVIS) for example surged from roughly $11 on April 15 to more than $26 on April 26. It seems that many traders jumped off the Bitcoin bandwagon when it met some resistance and looked for other YOLO investments that could be pushed higher despite having minimal fundamental value. Even MicroVision itself is pretty much a bet on Bitcoin as the company owns more 100,000 coins and has a two-pronged business strategy of making software and… buying bitcoin.
Technical Analysis
All this is to say Bitcoin has struggled recently with it trading largely between $30,000 and $60,000 since the beginning of the year. The cryptocurrency seems to have some strong technical support around $30,000 as whenever the price approaches that level traders buy back in thinking its a good value, which is to say, they buy the dip. Similarly, near $60,000 the asset meets large resistance with many traders selling off their holdings. The reason for these numbers has pretty much nothing to do with perceived value of the currency but instead is a fight between investors betting on whether they think it will fall or rise.
This can easily be seen when at almost every $10,000 interval the stock seems to hit a resistance or support point. $10,000 was a significant resistance point for Bitcoin for much of 2020 and even back in the middle of 2019. That same price then became a large point of support once it finally surpassed it in 2019 and again late in 2020.
Recent Trends
More recently though, Bitcoin has been trading between $30,000 and $40,000 over the past month. As many other trendy investments got the spotlight such as AMC Entertainment, Bitcoin calmed down quite a bit. The currency first fell back down to $30,000 after some confusing Musk tweets and the announcement that Tesla would stop accepting it. Since then, it has managed to get back to $40,000 occasionally such as when Tesla said it will accept the currency again (on some vague conditions) or MicroVision making another large purchase. However, negative news, chiefly China cracking down on cryptocurrency mining has brought the currency right back down to the low 30s.
The currency has strong support at $30,000 and tough resistance at $40,000 right now as a shift in attention has changed the price dynamics. Regardless, this technical analysis can be useful for predicting future movements, but obviously can't predict the news. Bitcoin may have some strong support at $30,000 but Tesla announcing it will sell all its holdings would likely push the price far lower than that support. Add on continued crackdowns in China or a potential scenario where MicroVision sells its holdings and even that $10,000 support could be useless. Similarly, if Amazon announces it will start accepting Bitcoin (purely as an example, there's no indication this could happen), expect Bitcoin prices to blow way past any resistance at $40,000.
Wrapping Up
Bitcoin has had an extremely rocky path to the $30,000 valuation it has right now. Volatile is probably an understatement but still it manages to show some clear points of support and resistance. Traders who know where these are may be able to take advantage and use it towards future investing decisions in the currency. However, investors also need to remember that it's only so useful if not news comes out that pushes Bitcoin and any other asset right past those support or resistance levels.
