Overnight, within 10 hours, the bitcoin price dropped to $9,514 in an abrupt decline from $10,177 by more than 6.5 percent.
The move has been interpreted as a largely technical move triggered by the failure of the dominant crypto asset to test key resistance levels above $10,000.
Where is bitcoin heading?
Prior to the decline below $10,000, which has been regarded as a key psychological level by many investors, technical analysts stated that the asset has seen strong resistance above $10,100 and the struggle to test the level could result in the asset dropping to mid-$9,000.
“Zooming in on the hourly looks like price is retesting the resistance above at $10,146 If price continues to retest this area, can see a good chance of it breaking and moving up to $10,586 Only a breakdown at this level will likely lead back to the $9,600s. BTC needs to hold above $9,906 or there will likely lead to a retest of the $9,600,” Josh Rager said.
Due to the intensity of the sell pressure, bitcoin broke below $9,906 with relative ease and declined below the $9,600 support level, leaving the asset vulnerable to a larger pullback.
According to Ceteris Paribus, bitcoin inflows surpassed outflows for the first time on Binance, one of the world’s largest crypto exchanges along with BitMEX.
$BTC inflows > outflows for the first month this year on Binance.
Total gross inflows by month (ex. outflows):
Jan – $572m
Feb – $456m
Mar – $492m
Apr – $671m
May – $692m
Jun – $2,343m
Jul – $2,171m (mtd) pic.twitter.com/teh2M1hOwR— Ceteris Paribus (@ceterispar1bus) July 25, 2019
Investors tend to withdraw crypto assets from exchanges to private or non-custodial wallets with the intent of holding onto the assets throughout the long term.
Inflows could signal the intent of investors to hedge their holdings in crypto assets to stablecoins like Tether or USDC.
However, Miguel Cuneta, the co-founder of Satoshi Citadel Industries, a leading crypto-focused venture capital firm in the Philippines, said that despite the consolidation of bitcoin at $9,000, the asset is up by more than two-fold year-to-date and by a couple hundred times since 2014.
“I’m still in awe that Bitcoin is consolidating at the $10,000-$9,000 range, and people see it as a ‘dip.’ $10K per BTC was crazy talk just a couple of years ago. Now it is being normalized,” he said.
As such, while the bitcoin price has dropped by more than $4,000 from its yearly high at around $14,000, it is still up by well over $5,000 since January 2019.
A potential negative factor
On July 24, Bloomberg reported that new crypto rules are imminent in the U.S. following the remarks of Treasury Secretary Steve Mnuchin.
“We’re looking at all of the crypto assets. We’re going to make sure we have a unified approach and my guess is that there are going to be more regulations that come out from all these agencies,” Secretary Mnuchin said.
Regulatory uncertainty in the U.S. market, which still remains as the biggest crypto market ahead of Japan and South Korea, could hinder the sentiment around the crypto market in the short term.
Several major exchanges have limited access to certain cryptocurrency pairings for U.S. customers and Poloniex is said to have been considering a move out of the U.S.
“Today, we’re expanding our global offerings with the launch and regulatory licensing of a new subsidiary in Bermuda. We plan to serve non-US Poloniex customers with our new Bermuda operations, and we expect to offer many new digital asset services from Bermuda over time. We will also continue our existing operations in the US, Ireland, the UK, and Hong Kong,” Circle CEO Jeremy Allaire said on July 22.
Click here for a real-time bitcoin price chart.