​Bitcoin price crash highlights fear of potential wider declines

Bitcoin prices have declined heavily over the past 24 hours. Why has that happened and is this the beginning of a wider bearish phase for the world’s largest cryptocurrency?

Cryptocurrency trading is only available to professional traders.
Find out more about our professional account

Bitcoin has slumped into a three-month low today, with the cryptocurrency poster child finally exiting a symmetrical triangle that has been approaching its apex. Coming off the back of an incredible first half (H1) of the year, there is a case to be made that we could be seeing the reverse happen in the H2. Those first six months of the month provided 185% worth of gains, and while that has come to the benefit of hodlers, it also provides a significant area for bitcoin to move into within this current decline.

Lackluster Bakkt launch

There have been a number of claims over why this decline happened, with initial reasoning drawing conclusions that it is associated with a loss of confidence over the lackluster takeup of the new Bakkt platform. Bakkt offers physically-settled bitcoin futures, yet demand has been questioned with first-day volume of just 71 bitcoins.

$1.2 billion sale

Another potential reason behind this sell-off was a huge $1.2 billion sale as reported by Byte Tree. That jump in sales is part of a wider 24-hour period which saw a 164% rise in transactions totaling $5.3 billion.

Triangle breakdown for bitcoin

The weekly chart highlights the bigger picture for bitcoin, with the price finally breaking lower from a three-month symmetrical triangle formation. The decline through $9081 support solidifies that breakdown after the initial move through the ascending trendline. With the wider rally having topped out around the 61.8% retracement ($13,408), some will believe that we could see a return to the lows of 2018. However, that seems somewhat speculative, and for the moment it makes sense to look at this as a likely retracement of the 2019 rally. With that in mind, it makes sense to look at the retracement levels drawn from the $3136 low. Looking at those levels, we can see that the 50% retracement has already been overcome. That means we will be looking towards the 61.8% and 76.4% Fibonacci levels as the downside targets from here.

Looking at things from the daily time frame, we have seen the price drop into the 200-day simple moving average (SMA). That has been respected both yesterday and today. Watch for a break below that level for a bearish continuation signal.

Finally, the intraday picture is highlighted on the hourly chart, with the price turning lower in the wake of an overnight post sell-off rebound. A break through the $8794 level would bring about a more bullish picture, building on the respect of 76.4% Fibonacci support at $8267. However, with the 200-day SMA remaining a hurdle to the downside, the bearish trend would look more secure with a break below the $8105.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Bitcoin trading

Speculate on bitcoin’s price movements without ever taking ownership of the cryptocurrency.

  • Use leverage to increase your exposure
  • Spreads start at just 40 points
  • Go long or short with CFDs

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. All share prices are delayed by at least 20 minutes. Prices are indicative only.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.