Worried traders dumped bitcoin positions again on Thursday as it failed to serve as an insurance asset amidst rising Coronavirus fears.
The bitcoin-to-dollar exchange rate fell to $8,520 in a massive overnight selling, extending its net week-to-date losses by up to 15.05 percent. The downside move came alongside a $$196 million worth of bitcoin liquidations on BitMEX, a crypto derivative platform that offers up to 100x leverage.
$150mln+ liquidations on BitMEX today – highest in 2020 pic.twitter.com/WO7aKyNhcI
— skew (@skewdotcom) February 26, 2020
The drop, meanwhile, came as a part of a broader bearish correction trend. The price of bitcoin plunged by 19.03 percent after establishing a year-to-date top of $10,522, showing that the cryptocurrency is entering a new downside phase.
Poking Long-term Support
Bitcoin’s depressive action this Thursday also brought it closer to testing a long-term support area. As shown in the chart below, the cryptocurrency fell right before the blacked and bolded 50-period moving average wave, before pulling back weakly to the upside.
Recent price data shows that traders encouraged buying when the bitcoin price was trading above the 50 WMA. Similarly, breaking below the wave resulted in deeper declines. In May 2018, for instance, bitcoin closed below the 50 WMA, which later sparked a wave of sell-offs. The cryptocurrency was down by 56 percent in the next seven months.
As of late, bitcoin looked poised to continue its bearish correction. The asset fell in the same week when benchmark stocks recorded their worst daily performances in the last two years.
Experts noted that investors resigned from risk-on assets after assessing the impact of Coronavirus outside China, with prominent economist Nouriel Roubini predicting further erosion in the global equity market.
COVID19 is only 1 of many 2020 White Swans: US-Iran full war; US-China cold war escalates; 1st global cyberwar btw US & China/Iran/Russia/NK; nuclear option of China dumping US Treas reserves shocks bond yields; political violence in US; severe climate shocks; new GFC/recession https://t.co/SpTi0tGcgK
— Nouriel Roubini (@Nouriel) February 26, 2020
The worsening global risks spelled worries for bitcoin, an asset that its community promoted as safe-haven against stock market declines. But with stocks falling alongside the cryptocurrency, experts noted that traders need cash liquidity more than any other assets, with market analyst DonAlt stating:
“For some odd reason, I don’t think the Coronavirus is bullish for the Bitcoin narrative makes much sense. The media talking about a pandemic isn’t going to get people around the globe to buy a speculative asset, it’s going to get them to buy preserved food and face masks.”
Next Bitcoin Bear Target: $4,000
If the selling continues, then bitcoin could easily slip below the 50 WMA. Such a move would sentimentally lead traders to target new downside targets in the medium-term. Going by the historical price behavior, bitcoin could fall by another 50 percent – towards $4,000.
On a brighter side, the slip below 50 WMA could prove to be a fakeout, as noted in November-December 2019 sessions. That would allow bitcoin to reclaim the wave as its long-term support – and continue its upside beyond the $10,520 yearly top.