Bitcoin, as well as most other assets in the financial markets, came under the highest selling pressure during Monday's trading session. The price of the main cryptocurrency fell below the 50,000 level for the first time since February, before the bulls started to gradually buy back the drawdown. The drop of more than 17% has been reduced to 9.5%, and today the rebound remains in place. Now the buyers need to regain control of the 56,500 level, after which the rebound of Bitcoin may speed up.
Yesterday's drop in the value of cryptocurrencies had no particular reason, with sell-offs affecting all segments of the financial markets. A weak report on the US labor market caused a massive withdrawal from risk, resulting in nearly $500 million being taken out of Bitcoin ETFs on Friday. However, Bloomberg analysts pay attention to the sufficient level of liquidity, with the spread between the purchase and sale prices of Bitcoin not exceeding 0.01%. To put it another way, those who wanted to get rid of the main cryptocurrency had no shortage of buyers.
Bloomberg experts focus on the reduction of liquidity outflows from Bitcoin ETFs on Monday. The withdrawal of funds totaled $168 million, significantly less than at the end of last week. So, the long-term investors were not so actively involved in the massive sell-offs, and the price plunge was caused mostly by speculators. Rich Rosenblum from GSR Markets suggests that the Bitcoin price may quickly return to $70,000 if traders' sentiments change.
One of the triggers for such a rebound may be Donald Trump and his supporters' plans to create a US Government Bitcoin Reserve. Now the US authorities control about 1% of the entire global supply of Bitcoins, mostly seized by law enforcement agencies. Trump is proposing to enter the cryptocurrency market and increase the government's share to 5%. Mark Connors from Onramp Bitcoin considers this scenario quite favorable for the Bitcoin price.
The RSI indicator entered the oversold zone, reinforcing the reversal signal on the daily Bitcoin chart. The nearest rebound target is the level of 56,500, and then the level of 59,500.
Consider the following trading strategy:
Buy BTCUSD above the 56,500 level. Take profit – 59,500. Stop loss – 53,000.
This content is for informational purposes only and is not intended to be investing advice.
