Bitcoin prices declined today, falling to their lowest since early October, and setting their latest multiweek low.
The world’s largest digital currency by market value dropped to $53,359.80, CoinDesk data shows.
At this point, it was trading at its lowest since October 6, additional CoinDesk figures reveal.
After falling to its lowest point in more than seven weeks, bitcoin prices bounced back, climbing above $57,000 later in the day.[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
Sellers Test Key Support Level
Recently, bitcoin prices have repeatedly moved toward $53,000, a level that some analysts have identified as providing key support.
While the digital currency has made attempts on that level, they have all been unsuccessful.
Several technical analysts weighed in on the implications of bitcoin’s repeated failure to convincingly break through support near $53,000.
“Beginning Friday, Bitcoin began testing the support at about $53K,” said Joe DiPasquale, CEO of cryptocurrency hedge fund manager BitBull Capital.
“Each time it fell to that level, it bounced higher, signaling strong support there,” he added.
“Today’s dip to just over $53K led it to bounce” back to a higher price, added DiPasquale.
“This signals that we have strong purchasing interest at that level. When repeated support this happens, it is evidence of demand at that level and a bullish signal that the asset will appreciate from there.”
Dylan LeClair, head of market research for Bitcoin Magazine, also commented on the situation.
“$53,000 is a key level, which happens to be the average on-chain cost basis of short term holders in the market,” he noted, citing market data.
“Throughout bitcoin’s history the realized price (on-chain cost basis) of short term holders has served as key bull market support.”
Konstantin Anissimov, executive director at CEX.IO, also spoke to key level. However, he offered a different take on the matter.
“We see three factors contributing to $53k serving as strong support,” he stated.
“Bitcoin’s market cap is $1 trillion at $52,950 USD. This level has been key support/resistance through 2021 and is now being retested as support again.”
The chart below illustrates what Anissimov described.
Further, he spoke to other developments that might interest market observers.
“Recent selling pressure is largely forced via liquidations with minimal signs of selling/capitulation from long-term market players,” stated Anissimov.
“This suggests the ~23% decline off all-time highs isn’t a larger trend reversal. Since November 10 (day of ATH) there have been $968 million USD of liquidations.”
Finally, Anissimov spoke to market sentiment.
He mentioned the “BTC Fear and Greed Index” provided by alternative.me, emphasizing that it was at 27 when he provided this input. The figure had increased to 33, a figure that also pointed to fear, at the time of this writing.
“BTC has hovered in the fear to extreme fear level of the index, which is usually the case after weaker handed holders have exited the market.”
Other Key Variables
In addition to emphasizing the key support provided near the $53,000 level, LeClair outlined several important factors for market observers to watch going forward.
He spoke to the derivatives market, noting that “although a complete flush of long biased derivatives have yet to occur, funding on perpetual swaps remains moderately high, but nothing too extreme or worrisome.”
“The macroeconomic backdrop and the potential for the Fed to delay tapering the current pace of balance sheet expansion is something bitcoin traders are watching closely,” added LeClair.
“Also, a rising dollar against other foreign currencies as seen in the dollar currency index (DXY) over the course of 2021 is also of significance, and should be watched closely.”
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and sol.