Why Bitcoin may drop further to last year's recovery

Technical indications are that the cryptocurrency Bitcoin, whose recent price is more than 30% from its July 2019 high, could drop further. ...

Technical indications are that the cryptocurrency Bitcoin, whose recent price is more than 30% from its July 2019 high, could drop further. The best way to describe the market is to look at the bear market last year, Bloomberg Intelligence analyst Mike McGlough said in a Bloomberg report. He added: "No need to rush to old tops - there's a surplus of stock rally in 2017. Just a lot of people have bought it, which is too long ago, and they'd be responsible sellers." 

Among the digital assets, Bitcoin has the most and most watched assets as well as the largest market capitalization, which is around $155 billion. The trading range between the 50-day and 200-day moving averages is narrower now than it was in June. In addition, the current price of bitcoin has fallen more than midday on Thursday, below the 50-day moving average, and an additional drop below the 200-day average could signal a sell signal.

Importance for investors

The price of Bitcoin fell from $ 20,000 in December 2017 to a low of about $ 3,200 almost a year later, down 84%. In 2019, it returned to $ 12,600 in early July, before reaching $ 7,400 in late October.

The price of bitcoin rose 35 percent to $ 10,000 on October 25 after Chinese President Xi Jinping encouraged his country to "seize the opportunity" in blockchain technology. However, the People Daily, a newspaper controlled by the people, warned that encouraging technical developments in the blockchain did not mean promoting digital currency trading, which the Chinese government opposed. Bitcoin traded between $ 8,600 and $ 8,700 on November 14.

Meanwhile, two professors from the University of Texas and Ohio State University have found that the 2017 increase in bitcoin may be due to manipulation. "Our results show that instead of thousands of investors changing the price of Bitcoin, this is just a big price," said Professor Griffin of the University of Texas in an interview with another Bloomberg article. "Years later, people will be surprised that investors will pay billions of dollars to people they did not know and have little control over," he added.

The two professors looked at Tether, a digital token that is supposed to hold the value of $ 1, and Bitfinex in cryptocurrency exchanges, a stock with the same owners and managers. They concluded: "It represented a player or a large entity or a clever market timing or had a huge impact on the price of bitcoin that is not seen in the general flow of other smaller traders."

Tether and Bitfinex officials deny the allegations. However, they are under US federal investigation, accused of misusing customer and corporate funds, and of manipulating bitcoin. Panamanian-based payment processing company Cryfo Capital, used by Bitfinex, is under investigation for money laundering of proceeds of illicit drugs.

Looking to the future

Despite these warning stories, investors are finding new ways to profit from Bitcoin fluctuations. Bitcoin-related derivatives trading for traders is a new and rapidly growing area, with daily trading value between $ 5 billion and $ 10 billion, about 10 to 18 times the bitcoin trading volume per third of the Bloomberg report. "This is where money has to be made in cryptography," Syed Shekar, co-founder of London-based TokenAnalyst data provider, told Bloomberg. "This is the biggest casino ever," he added.