BTC in Freefall on Barrage of Negative News
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Bitcoin (BTC) changed direction suddenly as renewed speculations of a complete ban in India affected the price. BTC had recovered to $45,000 before a rapid slide to below $39,000, extending the recent slide from the peak.
Despite talks of BTC revisiting the $40K range, the recent slide was unexpected, returning the leading coin to higher volatility. The 30-day volatility index is now at 4.61%, higher than the usual levels of 2% during more stagnant market periods.
BTC reached $39,652.69 during early European hour trading on Wednesday. The slide erased more than 12% overnight, extending the losses from the peak to nearly 40%. The slide happened on mid-range volumes of $65B in the past 24 hours.
BTC Price Close to Testing Levels
BTC moved down to retest its 200-day moving average, a boundary that may determine the market’s direction in the coming weeks and months. All BTC indicators point to a mixed message, with no certainty on the decisions of whales or the willingness of retail buyers to hold onto their shrinking portfolios.
A close below that range can extend the losses toward $35,000, also opening the doors to the end of the bull market. A close above the range would be encouraging for a price recovery.
For BTC, this was the first test of the trendline since March 2020, when the asset recovered the $8,000 range and started its latest climb to new records. The recent price drop happened during a week with multiple negative news, including the increased criticism of the carbon footprint of BTC mining.
However, until recently, BTC accumulation continued, suggesting the recent crash may be a market shakeout while preserving the longer-term growth trend.
BTC has easily recouped losses, adding thousands of dollars per day. But the shakeout has become the biggest test of 2021, returning BTC to levels not seen since January.
China Ban Talks Triggered the Slide
Initially, the BTC position suffered a blow from a recent expectation that China would ban its fintech companies from offering access to crypto assets. Fintech apps over the world have offered some form of crypto purchases, expanding demand for BTC, large caps or new crypto assets.
The event invited comparison to the 2017 news on China banning crypto trading against the yuan. This caused BTC prices to crash from above $3,500 back to about $1,000 before taking off to their record at the end of the year.
India Also Bans BTC?
The exact stance of India on using crypto assets remains uncertain. Exchanges in the country are strictly regulated. Crypto usage may go counter to the government’s goal of diminishing the grey economy.
It is possible the expectation of a ban has been played again to depress prices. Recently, the potential changes in the country were cited as one of the reasons why BTC shed value from its peak above $63,000.
The talk of an India ban may be adding to other bearish factors, including “whale” selling.
BTC Price Reveals Trading Anomalies
The BTC price revealed a trading anomaly, where it traded above $39,700 in its pairing with USDT on the Binance exchange. Fiat pairs on the Chinese Huobi exchange traded lower, at $39,639. The Bithumb exchange still held onto the price of $44,853 in the pairing with the Korean Won.
The premium on Korean exchanges had almost shrank to nothing before the crash. But Bithumb was also responsible for price records above $70,000.
Are Whales Selling?
While coins moved off spot exchanges, there are indicators some BTC may be flowing back into the Binance Exchange hot wallets. At this point, it is uncertain if the coins would be liquidated or used as collateral.
Still, in 2021 more BTC is held in cold storage, as well as remaining locked in DeFi passive income platforms. Some of the BTC held on exchanges is also used in futures trading instead of spot selling.
The BTC market cap dominance also fell toward 40.1%, as more funds flowed into altcoins. For now, altcoins also mark deep losses, with Ethereum (ETH) under $3,000. But there are assets like Polygon (MATIC) that for now resist the market slide.
Sentiment Sinks to Extreme Fear
The sudden volatility and the erasing of value turned the tides on market sentiment. The current mood is in the “extreme fear” range, the lowest since the crash of 2020.
At the same time, there is a longer-term expectation of gains, despite deep corrections. Institutional interest remains, with added retail interest in “stacking sats”.
The recent price drop ended a three-month streak where BTC closed above $50,000. The recent crash, is more often put into perspective and compared to previous corrections.
The current price slide took BTC close to the price where Tesla, Inc. made its purchase announcement. Some of the recent high-profile corporate purchases are under the water now, or barely in the money, though with a positive longer-term outlook.
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