On Sunday, the sudden drop in the price of Bitcoin, which slashed by more than 13%, within half an hour sent shockwave among the digital currency traders. It caused rapid sell-off of $1 billion worth of Bitcoin (BTC) in futures contracts and for Ethereum’s native token, Ether (ETH). The swift drop in the Bitcoin price of August 2 led to talks among the Crypto traders about bullish and bearish concerns in the crypto market.
Though the traders of the virtual currency are mainly optimistic about the future trend, but definitely they are moving ahead more cautiously now. Many speculate the reason behind this short-term price fall. On-chain data from Santiment showed that the scenario started turning precarious when the daily active addresses dipped as soon as Bitcoin hit $12,000. Santiment said that “daily active addresses on the network were not keeping up with the surging price,” explaining a swift correction.
The number of active trading address directly influence the Bitcon price as it reflects Bitcoin’s network activity. Besides the level the activity, the other key reason behind the drop was the low resistance level. On Sunday, before the plunge Bitcoin had hit its historicalresistance level of $12,000. For the past two years, $11,500–$12,000 range has been the hard resistance zone in the virtual currency’s trading. Everytime the trading activity pushes the price closer to that range, it has led to a prolonged correction.
It was in June 2019 that Bitcoin went beyond $12,000, with the price reaching $13,880 at a peak on BitMEX, but later it dropped to $7,700 within three months. If BTC goes over $12,000, there is little resistance to $14,000 and ultimately its record-high price at $20,000. Traders tend to turn more cautious and pull back as soon as it hits the $12,000 level. Scott Melker, one of the Bitcoin traders, explained that it was turning into a bullish divergence. He said, “It was building bear divs on multiple time frames, a retrace was inevitable. Now there’s potential hidden bullish divergence brewing, not yet confirmed. Price dropped with $15 of the previous major swing high, which was the line that signified a bullish break in structure.”
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