In the late afternoon yesterday, Bitcoin dropped 10%. This was most likely triggered by the news that a number of accounts had been compromised on the world’s largest exchange, Binance. Initially there were rumours circulating that the exchange was hacked, but reports to the contrary have emerged. Apparently, a trading bot that some users had given access to their funds on Binance, in order to place trades for them, went rogue. The bot sold their Bitcoin to buy an altcoin, the mass selloff of the bot was enough to trigger a wider selloff in the market.
Bitcoin dropped from where it was trading, at around $10 600 to as low as $9450. It has since recovered slightly, currently trading at 9700.
On the 4-hour chart, you can see that BTC has broken though the diagonal support trendline (purple line) and the moving averages have all formed a negative crossover, turning the short-term view bearish. Coupled with this you can see that On Balance Volume (OBV) dropped off significantly and has not yet bounced back to pre-crash levels.
Over a longer time frame, a one-day candle chart, you can see how BTC price dropped through both the 20 and 50 day moving averages, finding support at the diagonal support/resistance trendline. The moving averages are still stacked in bullish order, but the EMA8 is attempting to crossover the MA20, if it does so then this builds a bearish case for BTC.
What remains to be seen over the course of today is if traders come back to the market following this crash. If it was indeed not a hack but simply trading bot shenanigans then the damage should be limited and confidence could be restored to the market. I am waiting in the wings to see what happens for now, if we close below the diagonal support level today then we could retest the $9300 level.
Should you wish to learn more about technical analysis or investing in cryptocurrencies, check out our various seminars on offer. We cater for all levels.
Ricki specializes in the field of wealth management with a focus on holistic financial planning. He has a keen interest in the investment fields of property, technology, precious metals and cryptocurrencies. Ricki also holds a Masters degree in Science from the University of Stellenbosch.
Important Risk Notice:
Crypto Currencies are not defined as securities in terms of the Financial Markets Act, 2012 (Act No. 19 of 2012). The regulatory standards that apply to the trading of securities, therefore, do not apply to virtual currencies. Because virtual currencies are not regulated, users are not protected and are at the risk of losing money. Transactions are also irreversible. The price of virtual currencies is based on investor sentiment and can rise rapidly, thus attracting investors looking for very high returns from investments. However, the prices of virtual currencies tend to be very volatile and can drop as quickly as they rise. This may encourage speculative behaviour, which in turn spurs more volatility. Financial risks are, therefore, limitless and claims cannot be made for such losses.