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Breaking $9K: Bitcoin Trading Risks Ahead

Bitcoin

July 7, 2020 | 

JOHN K MWANIKI |  0 Comments| 

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Following the Bitcoin's activities is fast becoming more like a speed sport. The crypto investors understand how volatile the coin is and have to keep up. The financial year 2020 has been eventful.

Starting the first quarter on a high note, it ended in some of the lowest ever in recent times. By mid-March, it was trading at around $3,600. These are quite low values with all the Bitcoin market standards.

The sudden crush was a reaction to the effects of the Coronavirus on the economy. Even though most investors considered the coin a haven, it was unravelling with a falling traditional economy. The demand for currency declined, with investors looking for safer options. 

However, Bitcoin rallied back. After some time, it was back to trading the top levels at around $10,000. It has been at this level, considering the resistance level for some time now.

The nature of crypto is such that when it pushes through the resistance, there are higher chances of success.

If it fails to beat the level, then there is the possibility of a downward spiral. 

For now, the market indicates Bitcoin has failed to move past the resistance level. For that, it might be gearing for a decline. It has already inched lower to trade at $9000. 

Bullish and Bearish Scenario 

Immediately Bitcoin took an upturn, to rise after the March slump, two factions emerged. While the first team believed the rise was a bear run with an end in sight, the other party thought it was a typical run due to Bitcoin's volatile nature. 

The pro bullish traders were looking to it that the prices were rising without a corresponding number of investors. The rise also picked up against the run of trends as most people were dumping their crypto assets.

The other cryptos were also struggling to post similar results. It was more like the sustained growth would last for some time. 

Even though the coin is already trading at the low levels of $9000 - $9500, there is still a likelihood of resurging. After the rise of the currency even at the lowest levels, it can recover and regain the upward trend.

If this time it manages to beat the resistance levels, then it might trade even higher. With a broken resistance, it can reach $12,000. 

The other side of Bitcoin trading is the bearish scenario. This is where the coin takes the hit from the current $9k to even lower values. The current value, therefore, is more like a support zone.

Every time a coin fails to break the resistance, it returns to the support. The more it fails, the weaker the support zone gets. 

Bitcoin has been testing the resistance levels for some time and has been failing on all occasions. It means the support is most likely quite weak. With an inadequate support level, it might easily hit the lower levels of $7500 - $7800. 

Top Investors Scaling Back on Bitcoin 

It seems the bullish traders are already taking true to their fears by scaling down their investments on Bitcoin. The leading bearish traders are the Pension Funds that are opting for more secure assets. 

Having joined the market on the rise after the March downfall, it seems the investors have already made a killing. They are now looking to dump more than $170B stock soon. Such moves are quite detrimental, and Bitcoin might have to enforce a selling limit. 

Possible Effects of the Bitcoin Changes on the Other Assets 

Bitcoin is the ultimate cryptocurrency leader with its changes likely to spread to the other commodities. Most crypto investors tend to rely on Bitcoin price changes to determine market suitability. A reducing Bitcoin value looks to impact the other crypto coins negatively. 

Security is one of the provisions that traders look for when investing in crypto. The likelihood of a falling Bitcoin diminishes the possibility of assured returns on investments.

Like any other market, the crypto coins are subject to the law of demand and supply. Investors failing to trust in the crypto world reduces demand, thus lesser value. 

The price changes in Bitcoin are also likely to affect the traditional stock market. Even though most traders believe the conventional markets don't affect Bitcoin, it has some consistent correlations.

Currently, Bitcoin highly correlates with the S&P 500. Any changes in the prices of the Bitcoin are also observed in the S&P 500. A reduced Bitcoin value is likely to have a similar reduction in the amount of S&P 500.

Also, similar to Bitcoin, the S&P 500 also has the recovery power. For now, though, the stocks have been heading down, making them quite unattractive for investors. 

Is it Time to Abandon Bitcoin?

Nothing shakes the Bitcoin holders than a possibility of reduced values. Even though most traders understand the volatile nature of Bitcoin, they mostly want to win. Most of the traders take the market projections seriously.

They only invest with the prospects of a rise and dump the coins if there is any possibility of a downward spiral.

With Bitcoin on a clear path, the traders are torn on what to do. They fear to sell the assets only for Bitcoin to break the resistance level or retain the coin, only for it to go down. 

Any ardent Bitcoin trader, however, should not sweat it. They already understand that, no matter how much Bitcoin's value reduces, it always rises. Also, with the other stocks also going down, there is no other safer investment option.

The best option is to retain the coins and hope it breaks the resistance level or goes the long route of rising after a fall. 

Bottom Line 

After some time of trading at some of the highest levels, Bitcoin is now on the verge of reducing in value. Even though it is still on the top end of the support level, it is not clear whether it goes further down or it might recover.

With a second wave of the Coronavirus coming up, predicting the crypto economy is even harder. What is given, though, is that Bitcoin will recover no matter how long it takes. 
 

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