Bitcoin’s Drop Explained in Research Note

Those buying on the dip weren’t enough to push Bitcoin back north of $50,000, GlobalBlock sales trader Jonas Luethy said in a research note this week.

After briefly trading above $50,000 earlier this week, Luethy said Bitcoin has retraced downwards, breaking down from an ascending support line. Buyers failed to lift the falling price before it found support at the 200-day moving average. Bitcoin was trading around $47,300 when Luethy published and analysts have identified $45,300 and $44,000 as the next key support levels should it keep dropping. 

While the longer-term trend is iffy, in the short term BTC would have to break through that ascending support to reverse its direction. A total of 42,500 bitcoin option contracts worth roughly $2 billion are set to expire today, and that is likely a contributor to the price volatility and subsequent fall in price this week.

Altcoins mostly followed Bitcoin’s pattern. ETH is trading at $3,100, a fall of almost $3,400 from a few days ago. Solana remains an outlier, making a new all-time high of $83.93 today despite the downward trending market.

Today the Fed is expected to announce plans for tapering as the US economy recovers from the pandemic. Certain crypto analysts see tapering as an issue for Bitcoin speculation as quantitative easing is thought to give investors the liquidity to invest in riskier assets.

NFT sales exploded this month, totalling $896 million dollars in sales, more than triple the previous best month for NFT sales in May. One of the most popular NFT collections, Cryptopunks, accounted for nearly $400 million of the volume. Earlier this week, Visa purchased CryptoPunk #7610 for 49.5 ETH, worth just under $150,000. Within an hour after the purchase, nearly 50 more of the pixelated avatars were sold and the price floor of Visa’s Punk #7610 rose by $70,000.

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