On October 11th, the bitcoin (BTC) price dropped over 5% within 30 minutes, briefly falling below the $6,200 mark for the first time since mid-August. The sharp drop in BTC price has come at a time when the world’s equity markets have experienced one of their “worst sessions”, MarketWatch reported.
Many bitcoin supporters have said that the flagship cryptocurrency could become a haven during times of political and economic uncertainty - similar to how gold and other precious metals currently function as a store of value (SoV).
As CryptoGlobe reported in mid-August, Lou Kerner, the co-founder of CryptoOracle.io, a venture capital firm that invests in various crypto and blockchain startups, had said that bitcoin was “functionally much better” as a SoV than gold.
Kerner had also noted that people would gradually begin to switch from gold to bitcoin as they would begin to realize the cryptocurrency’s potential of being a more superior instrument for storing value and as a long-term investment.
However, market analysts have recently been expressing concerns about bitcoin’s performance and questioning whether it could actually become a legitimate asset class.
Craig Erlam, a former market analyst at Goldman Sachs and currently working at UK-based Oanda (a global corporation providing currency solutions), told MarketWatch:
The [cryptocurrency] selloff also appears to have stretched to more exotic instruments, with bitcoin [not] displaying the qualities one would expect of gold 2.0, as it has been touted as by some cryptocurrency enthusiasts, or simply escaping relatively unscathed as a new and relatively uncorrelated asset. Craig Erlam
Erlam, who has also worked as dividends adminstrator at Pershing Nominees, thinks both the traditional and crypto market are heading toward a “widespread selloff.” He added that traders will be looking to dispose “anything perceived as a risky asset class.”
Although Erlam did not mention whether he thinks bitcoin would drop below the $6,000 support level, he did note that the cryptocurrency’s price has found a floor at this price “on numerous occasions this year.”
As CryptoGlobe reported today, technical indicators suggest the BTC price could continue to decline further and that its $6,000 support might be tested again. The world’s most dominant cryptocurrency is exhibiting a “negative divergence pattern” - which is tracked by a technical indicator referred to as the Directional Movement Index.
According to Bloomberg, the index’s ADX is used to gauge the strength of the trend, which appears to have hit a bottom, and is now moving up. This suggests that the downward trend may gain more momentum and then continue to drop BTC’s price further.
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