As bitcoin and other cryptocurrencies saw their prices fall on Thursday investors were asking themselves: first, why the market had tumbled so sharply and, second, do such hefty falls justify renewed buying?
Bitcoin prices have fallen by around 16% in the past 24 hours, easing through the previous key support level at around $9,500 to fall below $8,400 on Wednesday. Other cryptoassets fared even worse: bitcoin SV is down by around 19% and bitcoin cash has shed 21% in the past 24 hours.
Data from Datamish.com suggests 500 million long contracts had been liquidated on Seychelles-based crypto-derivativesplatform BitMEX, causing heavy selling on crypto exchanges.
Entering Oversold Territory?
While the technical analysis appeared to point towards further short-term losses, some key market signals could be indicating that the market will soon be entering oversold territory and buy opportunities could arise in the coming days.
Back on June 7 – nearly three weeks before bitcoin hit an 18-month high close to $14,000, the Crypto Fear and Greed Index hit 27 – registering “fear”. On Wednesday, the index was down to 15 – registering “extreme fear” – which can be a sign investors are too worried, and eager to sell to take some profits after recent gains. Thus, a seemingly severely-bearish reading on this index, can be interpreted as a buy signal.
Also, several market commentators have recently compared bitcoin’s properties – its scarcity and store of value – to those of gold. If equity markets continue their recent losses and global economic signals weaken further as countries such as China and the US pursue growth-damaging trade conflicts, then investors may seek bitcoin as a haven asset in the coming weeks.
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