Bitcoin’s tumble continued on Friday, with the cryptocurrency falling at one stage by fifteen percent to just $7,960 – sixty percent lower than December’s high just shy of $20,000 ($19,891). An afternoon rebound saw bitcoin end the day close to $8,600 but that did little to improve sentiment in the face of scrutiny from regulators and other bad news this week.
Of course bitcoin wasn’t alone. Cryptocurrencies were sold far and wide and ethereum was hit hardest of all, falling at one stage by twenty-six percent on the day to $768, before ending the New York afternoon close to $890.
It’s been “nothing but bad news for [cryptocurrency] bulls of late,” said ETX Capital’s senior market analyst Neil Wilson on Friday.
“The wheels are coming off the bitcoin bandwagon,” Wilson believes.
For the first time in their short histories, cryptocurrencies are facing pressure from regulators globally. The past week saw South Korea put an end to anonymous trading of such currencies and saw a statement from the Indian finance ministry in which it was announced that the Indian government would not consider crypto-assets as legal tender and would take “all available measures to eliminate the use of these…in financing illegitimate activities.”
Regulators in the US have also woken up to the need for cryptocurrency oversight, with Treasury Secretary Steven Mnuchin announcing on Friday his plan to raise the topic of cryptocurrency regulation at March’s G20 summit in Argentina.
Regulators in China and Russia are also thought to be exploring new restrictions on cryptocurrency trading.
Further to regulatory matters, Facebook announced on Tuesday that it had banned all advertising relating to cryptocurrencies and initial coin offerings. The social media giant expressed concern that a disproportionate number of crypto-promoting ads were in fact related to scams.
The past week’s developments can be added to January’s negative bitcoin press, which included the closure of the lending and exchange platforms of Bitconnect – the owners of which had long been accused of operating a Ponzi scheme – and news that Japanese cryptocurrency exchange Coincheck had been hacked and subsequently robbed of ¥58 billion (roughly $530 million) worth of NEM, sparking concerns for the security of digital money.
The recent tumble in the price of bitcoin and its peers is not necessarily a bad thing, however; at least not in the opinion of Oliver von Landsberg-Sadie, the founder of cryptocurrency brokerage BitcoinBro.
For von Landsberg-Sadie, the crypto markets have been crying out for a “healthy correction” following astronomical rallies in 2017. But while many will have been burned in the past month attempting to buy on dips, von Landsberg-Sadie remains “very bullish on the long-term view of cryptocurrencies in general.”
Recent problems are merely “growing pains,” argues von Landsberg-Sadie, and rather than being something for bitcoin investors to fear, improved regulation marks a step forward.
“South Korea’s stance on making sure that the exchanges know who they’re dealing with is a very positive step,” von Landsberg-Sadie told Bloomberg TV.
Still, in the absence of positive news flow, traders wishing to buy cryptocurrencies are left searching for technical triggers to enter long positions.
For bitcoin, one such trigger came on Friday in the form of a completed AB=CD pattern, otherwise known as a “measured move,” which coincided with the $8,000 level and which the market has so far respected. The pattern’s ‘D’ completion point – $8,060 to be precise – is clearly visible on daily price charts and is easily determined by projecting the distance of the December 17-December 22 decline down from January’s peak at $17,250.
Another useful technical level within close proximity to current prices will be $7,700 – that being the 61.8% Fibonacci retracement of bitcoin’s 2015-2017 rally.