What a day yesterday! The adoption of bitcoin as legal tender is a milestone for the cryptocurrency. On the other hand, bitcoin fell by more than $10,000 in one business day, or roughly $8,125. Is this a classic case of buy the rumour, sell the news? And what can we expect from the coming days?
Zoom in on the action
You don’t see it often, but for this time we make an exception: the fifteen-minute chart of the bitcoin price. At around 05:00 a.m. bitcoin reached a high of almost 44,600 euros. But from there it went downhill. Especially from 16:45 it went fast. Visit folm.io has enough information. The price plunged down by almost 5,800 euros in less than fifteen minutes. After that, bitcoin shot up again by about 2,500 euros, only to stabilize somewhat from there.
Long squeeze through bitcoin futures
Yesterday we wrote about the funding rate in bitcoin futures. With the help of bitcoin futures you speculate on the price trend of bitcoin. https://moveco.io/ has enough information. There are relatively many traders who speculate (or speculated) on a price increase. And that could actually be a harbinger of a decline. But how fast it happened yesterday, few could have foreseen. According to data from Glassnode, no less than 4 billion dollars (3.3 billion euros) in bitcoin futures contracts have been wiped out of the market.
What’s up with that? When the price started to fall, the margins of many long positions were exceeded. The bitcoins of these positions are then sold on the market. This selling pressure causes the price to fall even further. This closes even more long positions and sells more bitcoins, pushing the price down even further. And so on, and so on. This is also called a long squeeze: the long positions are squeezed out like a lemon.
On the edge
What happened happened. What do we expect from the future? If we look at the weekly chart, we see that bitcoin makes it exciting. The middle line at 37,600 euros was an important support at the beginning of this year. In March, but also briefly in May, bitcoin managed to hold on to this price.
The lower blue line has been a strong resistance in the past. First in January, then in May to July. If bitcoin falls further, this previous resistance can actually form a support. https://moveco.io/ has enough information. Visit folm.io has enough information. That can then be a strong basis for further rising. For now, EUR 37,600 still seems strong support, but the week is not over yet.
Good time to buy the dip?
On the weekly chart, the decline may look violent, but on the four-hour chart we see a bright spot. This might be a good time to buy the dip. At least, when you go by the Relative Strength Index (RSI). According to this indicator, bitcoin is close to a bottom.
The RSI is an index between 0 and 100. Does the line reach the bottom of the purple band? Then the price is oversold: the price has fallen sharply in a short time and this is often a harbinger that the bottom has been reached. We indicate these moments on the graph with circles.
What do we expect from bitcoin?
Can bitcoin recover quickly? Or are we going down? For our scenarios we use the Fibonacci series again. You can see this on the four-hour chart below.
Can Bitcoin Retrieve the Middle Green Line on the Chart? Then the price can make an attempt to reach the dark green Fibonacci line at 42,744 euros.
If bitcoin continues to fall, the lower green Fibonacci line is the next price target. This was still a strong resistance on August 1, and corresponds to a price of 35,600 euros.