What started as a great year for Bitcoin quickly turned into yet another example of the unpredictable volatility of the world’s number one cryptocurrency. Only two days ago, bulls were storming the Bitcoin market and the price was running above $1100 with full steam, while today exchanges are headed into an entirely different direction and Bitcoins are being sold near the $900 range.
But the nature of the cryptocurrency has always been such that you can never exactly predict when these things occur, which is exactly what happened yesterday when even high-profile media were reporting on the healthy growth of Bitcoins, without even a clue that a plunge was in order just a couple of hours later.
The price of Bitcoin has been coming down rapidly over the past 48 hours, with all technical signals showing that the trend will likely continue. It all started yesterday afternoon, when the price took a steep plunge from $1060.40 to $892.90 and has since struggled to recover.
Looking at the trading volume, it seems that a bit of panic or profit-seeking is hitting the market, as the volume is at $459,437,000 – an unbelievably high level of trading which might be the first for Bitcoins. The normal trading volume ranges between $100-200 million, with the closest we’ve got to the current value was in the Mt. Gox exchange hack aftermath, when it reached $330 million and sliced the price in half. This hints at further price drops, when you also consider the trading trends.
Right now, our technical analysis shows that the market is heavily into selling, with 8 out 12 moving averages and 6 out of 12 technical indicators showing a selling signal. However, the long term SMA 100 is still above the SMA 200 with a wide gap, while the Stochastic is already in the oversold zone, which hints at bulls possibly returning to the market to profit on the low prices.
For now, the situation remains difficult to predict, with all indicators showing Bitcoins are being sold and headed for further price drops but the price has been going up and down from one hour to the next. But this is nothing strange for Bitcoins, as it is not the first time investors have had to wait out the panic.
Chinese Yuan, Regulations and Bitcoin
Over the past month there has been much talk about how tight Chinese regulations on money outflow from the country and Yuan’s loss of value has turned many investors to Bitcoins and thus caused its incredible price growth in the last months of 2016, and now once again the price is seen to be a direct result of China trends, among other things.
Apart from the obvious reason of traders looking to profit by selling fast at Bitcoin’s highest value in 3 years, new reports suggest that the recent volatility can be explained, in one part, by the increase in value of the Chinese Yuan which grew by 1% in a single night. This long-awaited growth was also accompanied by a drop in interest in Chinese Bitcoin exchanges who went from selling BTC at premiums to selling it on discounts, according to the Forbes.
The reason for the loss of interest can be found in the latest changes in financial regulations in China, where the People’s Bank of China set a limit on cash transactions and banned Bitcoin trading due to risks involved, which prompted even the world’s second largest exchange, BTC China, to stop accepting Yuan deposits. If stricter changes are made, many believe that BTC value will follow.