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Bitcoin Drops 5% in 24 Hours in Latest Selloffs – Anticipating the Bounce Back

Since dropping below the $10,500 mark in early September, an important resistance level for Bitcoin’s price action for the most part of this year, BTC has been inching its way upwards in a rather steady manner. It dipped several times over the next few days to $10,000, but since September 8, a clear uptrend can be mapped out for the world’s largest cryptocurrency. On September 19 to 20, a price rally took BTC to the $11,000 mark but failed to sustain that level. In the last 24 hours, BTC lost 5% to drop from $10,900 to $10,400, according to statistics from CoinGecko.

“The past week has been pretty much quiet for Bitcoin, as a raft of new decentralized finance or DeFi protocols hogged the limelight with the promise of high yields for token holders and liquidity providers, meaning that most of the trading activity has centered around Ethereum, the platform where 90% of DeFi products are based on,” CEO of Novum Alpha, Patrick Tan, said. “Resilience over US$10,000 and macro chaos caused by the coronavirus pandemic provide sufficient narrative that could see Bitcoin bulls push the cryptocurrency higher towards the end of the week despite an interim pullback.”

An overview of global financial assets also show losses on most counts, with S&P 500 (-1.16%), tech-heavy Nasdaq Composite (-0.13%) and blue-chip Dow Jones Industrial Average (-1.84%) continuing to weaken on worsening coronavirus pandemic conditions. US Treasuries, oil, gold, and the USD did not fare any better this week. Aside from new waves of lockdowns, managing director of eToro Guy Hirsch attributed equities losses to increased uncertainty over the US elections and political climate after Supreme Court Justice Ruth Bader Ginsburg’s death, which happened over the weekend.

If the mounting uncertainty lasts, this is a good opportunity for Bitcoin and other crypto assets. Stablecoins in particular may see an uptick in demand, especially after the US Office of the Comptroller of the Currency (OCC) and US Securities and Exchange Commission (SEC) announced in public letters that financial institutions such as national banks and federal savings associations are legally allowed to hold stablecoin reserves, as long as they are held in digital wallets and are pegged 1:1 to a fiat currency such as the USD.

Bitcoin’s recent performance and strength have boosted traders’ optimism in the asset, and the market has not yet taken into consideration Bitcoin options contracts.

“With almost US$2 billion worth of Bitcoin options set to expire this week, Bitcoin may come back into focus again in a fresh wave of volatility. With Bitcoin option open interest soaring to over three times what it was just a few months ago, at US$1.9 billion, according to Skew, that some 47% of these contracts will expire by Friday means that it’s not just the coronavirus pandemic that is likely to fuel volatility in the Bitcoin market,” Tan added.

You may also want to read: Crypto Market Stumbles as DeFi Tokens Plunge, Can UNI Help Kick Start Another Hype Cycle?

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© Copyright of Novum Global Consultancy Pte Ltd {2020, 2021}. All rights reserved.

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