Bitcoin’s Four-Month Low: What’s Happening?
The Mt. Gox Snowball Is Rolling Downhill
Bitcoin took a nosedive this week, hitting its lowest point in four months. The price dropped over 12% for the week, to a low of $53,550, breaking the support levels at $57,000 and $55,000, as well as the lower barrier of the descending channel. This decline marks Bitcoin’s lowest since late February.
Ether, the second-largest cryptocurrency, also experienced a significant drop. It fell more than 16% to $2,815, marking its lowest point in over two months.
The reason behind the crypto drop may be Mt. Gox: reports suggest that the defunct Japanese exchange Mt. Gox might start returning Bitcoin to its creditors. Given that Bitcoin was worth only a few hundred dollars in 2014, these creditors are likely to sell, as they would have a massive profit.
So, maybe the current sell-off is created by traders who are trying to sell before the Mt. Gox investors do. That’s because once the Mt. Gox funds hit the markets, the price may be even lower.
There are also concerns about the political landscape. Some analysts are worried that President Joe Biden might be replaced as the Democratic candidate by someone less favorable to cryptocurrencies, following a concerning performance during the debate against Donald Trump.
Chart Analysis – BTC/USD
Bitcoin has been trading in a range for quite a while and at the bottom of that range, usually, there are a lot of positions. As the bears break the lower barrier of the range (in this case, the descending channel), many bulls may have their positions liquidated.
This will automatically turn them into sellers. In other words, if this is indeed a true break, it may go a long way south because there are multiple factors that favor an extended drop.
But we must also account for the RSI which is hitting its 30 level (oversold) for the second time in a very short while. The last time the RSI was oversold was in August 2023, so this “double” oversold may be something to keep an eye on. However, there’s no bullish divergence yet and Bitcoin can spend a lot of time in overbought or oversold so we cannot consider the current RSI position a signal to buy.
