Bitcoin Flash Crash: Does BTC fall to 7,000 USD?

  • With the Bitcoin price down nearly $2,000 from the beginning of the week, many investors are wondering if the bear market has returned.
  • The question of whether Bitcoin can maintain the important USD 8,000 mark will play a very important role.

The Bitcoin price suffered a flash crash at the beginning of this week, after a consolidation period of several months, and collapsed by over 1,000 USD within a very short time. The uncertainty among many investors, as it will continue for Bitcoin (BTC) now, is great. Some experts have already declared the end of the bullish phase and the beginning of a new bear market. Whether this prediction is too pessimistic remains to be seen. What is certain, however, is that the current USD 8,000 mark is an important level that should be maintained.

8,000 US dollars is a very important level for BTC

In a recently published tweet, the well-known crypto analyst Crypto Hamster pointed to a very important technical sign, the Bollinger Bands, which are currently in a critical area. Currently, BTC is just above the lower Bollinger band. In a bull market, Bitcoin has never broken this lower band. In addition, as the Twitter user “doc clockwork” realized, the weekly RSI (Relative Strength Index) in a bull market has never fallen below 50. This level has been briefly broken in recent days.

Although the loss of the lower Bollinger Band on Bitcoin’s weekly chart would probably be a devastating blow, this does not necessarily mean the end of the bull market. Applying historical price models to current price developments does not necessarily have to be correct. Perhaps BTC is only moving on unknown territory.

From a chart technical point of view, the following tweet by Josh Rager, which points to strong similarities between the current situation and the price movement at the beginning of the year, is also very interesting:

If you invert the current chart of Bitcoin…. The price action is remarkably similar to the market low of $3k before the $1000 candle at $5k.

Just put “1/” in front of the Bitcoin symbol, split the screens and compare the two yourself 🙂

Price slumps of over 10% are not uncommon at Bitcoin

On the other hand, Bitcoin’s historical price movements can also be used to argue that price drops of more than 10 percent are not unusual for Bitcoin. As Messari has found out, BTC has a long history of fast and steep setbacks. In total, the BTC price has fallen more than 10 percent 70 times in the past. This was only twice the case in 2019.

Bitcoin hash rate sets new all-time high

The Bitcoin Hash Rate also speaks for a continued bullish trend. True to the motto “the Bitcoin price follows the Bitcoin Hash rate”, the BTC price would have to rise again. After the Bitcoin Hash rate broke down few days ago still suddenly around 40 per cent, it rose yesterday to an all time high of over 108 Exahashes per second.

This clearly shows that despite the dramatic drop in prices, the mood among miners remains positive, especially with regard to the Bitcoin Halving in May 2020. The miners expect a rising Bitcoin price in the long run.

All just manipulation?

Some analysts have pointed out that the expiration of Bitcoin futures contracts on the CME could have a big impact on the BTC price. It is obvious that the Bitcoin price has almost always fallen in recent months before the expiration of the CME Bitcoin futures. Within the crypto community there is therefore the theory that whales bet on a falling Bitcoin price on the CME and then cause a price collapse on the spot market through the shortening of Bitcoin (with leverage).

As Forbes recently reported, Arcane Research has addressed this issue and investigated a correlation. Arcane found that in 75 percent of all cases before CME futures contracts were settled, Bitcoin experienced a price slump. The study shows that since January 2018 Bitcoin has tended to decline by an average of 2.27 percent with increasing monthly settlement. Adjusted for “large outliers, the rate is 1.99 percent.

Bendik Norheim Schei, analyst at Arcane Research, said in an interview with Forbes that certain types of Bitcoin futures contracts, especially those from the CME, are relatively easy to manipulate because they are settled in cash. According to Schrei, the connection is no coincidence:

Statistically, it is highly unlikely that the fall in prices prior to CME settlement should be caused by chance.

All in all, the future development of the crypto market is, as so often hardly predictable. Only the next few days can show how the BTC price will continue.

About Author

Jake Simmons has been a crypto enthusiast since 2016, and since hearing about Bitcoin and blockchain technology, he's been involved with the subject every day. Beyond cryptocurrencies, Jake studied computer science and worked for 2 years for a startup in the blockchain sector. At CNF he is responsible for technical issues. His goal is to make the world aware of cryptocurrencies in a simple and understandable way.

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