It has been more than 24 hours since bitcoin scared investors with a sudden 10 percent drop. But there hasn’t been a concrete recovery action — yet.
The bitcoin-to-dollar exchange rate has surged 2.21 percent from its previous low at 5291-fiat, now trading at 5408-fiat. The coin’s market cap has risen likewise but remains below the three-figure billion dollar valuation. The weekly chart on Coinbase indicates BTC/USD is testing the support area of a giant falling wedge formation. Technically, a falling wedge formation predicts a potential breakout action. But in the case of bitcoin, the negative trend more or less is driven by fears raised at the behest of a hard fork event.
Bitcoin Cash Hard Fork
The ongoing Bitcoin Cash (BCH) hard fork has been touted by some as the main perpetrator of the latest crypto market crash. The software upgrade has split the original BCH blockchain into two networks, tentatively called BCHABC and BCHSV. Traders are pondering whether the coin, which itself broke from the original Bitcoin blockchain, is weighing on its older sibling.
BKCM’s Brian Kelly thinks investors are confused about the outcome of the said hard fork. They are running away from both the BTC and BCH markets, fearing slowdown that may ponder upon their holdings in near-term.
“People started selling. That triggered stops. Everybody got concerned,” Kelly explained on CNBC Fast Money. “And that’s what happened today — the entire market sell-down.”
Kelly expected the entire sell-off episode to be a “short-term event,” adding that it could be an opportunity for large investors to enter the space at the newfound bottom.
Meltem Demirors, chief strategy officer at CoinShares, supported the theory but provided a separate fundamental altogether. To her, it would be the failure of second-class coins that would allow investors to jump back on the bitcoin train.
“They’re going to need to start firing employees. They’re going to need to cut costs,” she said. “You’re going to see consolidation, and some of these assets, inevitably, will get marked to zero.”
Many analysts believe that the bitcoin downtrend is far from over, and the coin is yet to find a bottom level.
Stephen Innes, Oanda Corp Asia’s trading head, predicted that the BCH hard fork could destabilize the crypto market for far longer than expected. According to the analyst, BTC price should stay on a downward path and break the psychological support level at $5,000.
“Market opens the door to a test of $2,500 as bitcoin retail traders move from buying on a dip to full-out panic mode,” Innes told Bloomberg.
Meanwhile, global crypto exchanges have pledged to support the new BCH alternative with an aim to improve the current market sentiment.
. Charts from TradingView.