The Federal Reserve released testimony Wednesday pointing to a long road ahead for an economic recovery in the United States. That news fueled fear in already uncertain investors who had growing suspicion as to where the Stock Market was deriving its growth. While the Fed is still propping up the stocks and will continue to do so indefinitely, faith in continued upsurge seems to be diminishing. As stocks fell drastically on Thursday, they succeeded in pulling down crypto as well – with Bitcoin dumping nearly 10%.
What’s next for Bitcoin? After dipping as low as $9K on Thursday, BTC managed to claw back some gains. At the time of press, Bitcoin is trading at $9331. The current price level has been respected as support at least ten times on the daily chart since mid-May and half that number as resistance for the same period. Looking further back, the $93K-$94K range has provided consistent support and resistance. Although the previous support level is holding up at the moment, there are a few bearish signs that the level may not hold for long. One such indicator is the 50-day MA which is currently well above the current price.
Bitcoin, of course, was not the only cryptocurrency affected by the sudden dip in price. Nearly all of the most popular cryptocurrencies were trading lower by the end of Thursday, with many of those suffering losses similar to BTC’s near-10% drop in value. The loss in value is eerily similar to the Stock Market’s as it, too, dropped by more than 5% in a day. The S&P 500 and other broad market products lost almost the same value as most cryptocurrencies.
Does that signal a bear run for Bitcoin? At the moment, nothing is clear. However, there are still many reasons to keep on eye on the world’s largest cryptocurrency in terms of market cap. Apart from nearly all financial markets seeing red on Thursday, Bitcoin was on a strong run in a bullish direction leading to today. Couple that with a lot of strong investor sentiment leading up the today and you find even more reason to be bullish with Bitcoin, despite its recent dip.
Still, the other side of the coin must be respected as well. Bitcoin is notoriously volatile and could dump a whole lot more before making any kind of bullish recovery. Institutional money is now playing a significant role in Bitcoin price movement. There are record numbers of new-to-Bitcoin contract types opened every day, and many of the same investors now responding to turmoil in the stock market will react similarly towards their crypto investments. According to John Todaro of TradeBlock, the increased level of Bitcoin investments made amongst traditional investors means that crypto markets will now be drug into many of the dramas experienced by other asset classes.
Getting back to the question of what’s next for Bitcoin, it will be important to observe how closely correlated it is with the stock market over the next couple of days. It seems that stocks may be in a slump for a while, but if BTC breaks free and starts heading back up it would indicate that Bitcoin is being used as a store of value and a hedge against inflation fears and a declining market overall. Will we see a continued period of Bitcoin dumping value or will it make a comeback?