Bitcoin remains under pressure following weekend plunge

By Samuel Indyk

Investing.com – The price of Bitcoin was below $48,000 on Monday morning after a weekend drop that saw over $170 billion wiped from its market cap. Bitcoin had staged a slight recovery on Sunday but the gains were relatively short-lived and Bitcoin remained under pressure on Monday.

There was no single explanation for the price plunge in Bitcoin over the weekend but the focus has centred around the risk-aversion that had gripped markets last week.

Concerns remain that the Omicron variant could cause the global economic recovery to slow as countries take new measures to slow the spread of the virus.

Meanwhile, the Federal Reserve looks almost certain to speed up its tapering of asset purchases in December, which some have argued could mean sooner-than-expected rate hikes, despite the Fed’s insistence that the end of QE does not necessarily mean the beginning of rate increases.

The fact that the “flash crash” occurred at the weekend could have also exacerbated the move as liquidity was likely thinner than during the week.

“Bitcoin and the other cryptocurrencies are selling off because market participants are increasingly realising that they are risk assets and in periods of market disruption, investors seek safe haven assets,” Robert R. Johnson Professor of Finance, Heider College of Business, Creighton University exclusively told Investing.com. “Crypto advocates tried to posit that Bitcoin was like digital gold, but Bitcoin has increasingly been under pressure when other risk assets have fallen in value.”

After falling below its 200-day moving average around $46,400 on Saturday, Bitcoin then reclaimed that level and so far, has remained above the key technical support.

Technical traders will be looking for the coin to hold the 200-day moving average to confirm the end of the correction, while a break below that level could signal further weakness to come.

“Bitcoin’s plummet to $42,000 was very near to the 61.80% Fibonacci retracement of the January to November rally,” OANDA Senior Market Analyst Jeffrey Halley said in an emailed note. “The 200-day moving average at $46,400 also held on a closing basis. I’m not going to say the coast is clear until Bitcoin reclaims $53,000, though.”

Other analysts are equally less committal on the direction of travel but caution to expect volatility ahead.

“The only thing you can guarantee is volatility, so a brave trader will buy big corrections and sell recoveries,” Clem Chambers, CEO of stocks, shares and crypto website ADVFN told Investing.com.

At 14:27GMT, Bitcoin was trading around $48,300, down around 1.5% in the last 24 hours. 

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