Bitcoin extended its bullish-to-bearish pullback further on Thursday as its price fell by more than 7.5 percent.
The benchmark cryptocurrency hit $32,000, its worst level in almost two weeks. Traders continued selling the token after assessing two bearish fundamentals for the crypto market. The first downside catalyst was a Deutsche Bank survey that found that Bitcoin and tech stocks are “the biggest market bubbles” currently.
“When asked specifically about the 12-month fate of Bitcoin and Tesla — a stock emblematic of a potential tech bubble — a majority of readers think that they are more likely to halve than double from these levels with Tesla more vulnerable, according to readers,” the bank said.
Yellen FUDs US Traders
Meanwhile, the second bearish cue came from incoming Treasury Secretary Janet Yellen. She highlighted Bitcoin’s alleged role in financing terrorist and money laundering activities, calling out to the US regulators to curtail the cryptocurrency sector.
“The technologies to accomplish this change over time and we need to make sure that our methods for dealing with these matters, with tech terrorist financing, change along with changing technology, cryptocurrencies are a particular concern,” Ms. Yellen said on Tuesday.
Lingering between the two strong but short-term bearish fundamentals was also an on-chain downside signal. Ki-Young Ju, the chief executive of the blockchain analytics platform CryptoQuant, forewarned about whales depositing their Bitcoin holdings to exchanges, thus hinting a sell-off.
“It seems BTC sellers came from Coinbase,” SAID Mr. Ju. “Coinbase Premium Index has been a negative value since an hour ago. Coinbase whales might want BTC to go lower for consolidation.”
— Ki Young Ju 주기영 (@ki_young_ju) January 20, 2021
Imminent Bearish Bias
Bitcoin’s plunge on Thursday also came in the wake of higher profitable opportunities.
The cryptocurrency rallied by more than 1,000 percent after hitting $3,858 in March 2020. Traders apparently thought it is ideal for securing profits to protect their portfolios against potential bubble pops, same as the one that followed 2017’s run-up to $20,000.
But many analysts see the drop as a short-term setback against a long-term bullish bias. Independent analyst Edward Norris noted that the price is now testing the 4H 200MA as support, a wave that has lately withstood extreme selling pressures.
“Ever since we broke it at $10k in October, we only tested it twice (now 3rd time),” he explained. “So, doesn’t make sense to get bearish while it holds.”