The virtual currency bitcoin is as speculative as it gets. The digital currency either moves up way too fast or crashes like a jet out of fuel. When it’s doing nothing of these two, it bores the market participants to death! Currently, it is crashing after the market signaled a reversal yesterday.
Bitcoin is presently down 10 percent at $662, after having touched an intraday low of $625. The selling pressure is increasing by the minute as can be seen by the surging volume candlestick in the daily BTC-USD price chart from BITSTAMP exchange.
In view of the reckless moves that bitcoin can make, it is definitely not an easy job to call a support, however, we believe that the recent stoppage level of $575 will act as a near-term support.
But, why is bitcoin crashing?
In simple terms, there is nothing terrible that has happened in the bitcoin space and today’s selloff is just long positions getting unwounded. However, those who entered late in the party have been caught off-guard and are probably already in huge losses. The technical indicators and the price action of yesterday suggested that a correction was coming.
Leaving aside yesterday’s session, the digital currency seemed to be struggling to touch the psychological level of $800 even as it registered higher lows on a bullish note. But yesterday, the cryptocurrency broke the streak of higher lows and ended the day lower, indicating that selling pressure was increasing.
Technical indicators such as Money Flow Index had already been depicting a declining trend, in stark contrast to the upward journey of the price. This negative divergence should have cautioned the bulls, but they were probably too deaf to hear anything or too blind to see anything which went against the euphoria.
For now, book your losses and get out. Do the same if you are sitting on huge profits as the sell-off is likely to intensify. Wait for sustenance near $575 before going long in bitcoin.