Bitcoin’s price consolidated Thursday, as the bulls continued to face strong resistance from an upsurge of short positions placed in the futures market. The digital currency’s 30% drop since Nov. 13 has triggered the biggest rise in volatility since May, a discouraging sign for those eyeing a short-term bounce in prices.
The bitcoin price traded within a $250 range on Bitfinex Thursday with a peak-to-trough of $4,723.70-$4,481.60. At the time of writing, BTC/USD was trading hands at $4,559, down 2.2% from the previous day.
However, on Coinbase, bitcoin was trading at a much larger discount just below $4,450 – a decline of 1.5% based on the exchange’s 24-hour tracker.
Aggregate pricing data courtesy of CoinMarketCap shows an average value of $4,508. In all the above cases, bitcoin appears to be facing strong resistance in the $4,600-$4,700 range. A breakout above this barrier is needed to generate a meaningful rally in the short term.
Over the course of the nine-day selloff, bitcoin’s market cap has plunged by more than $32 billion to reach $78.4 billion. Trade volumes have picked up sharply on exchanges and in the futures markets, with CBOE and CME trading an equivalent of 22,266 BTC as of Monday.
The sharp rise in futures trading was also evident on virtual currency exchanges, with derivatives platform BitMEX processing more than 41% of BTC trades earlier in the week. As of Thursday, the exchange was responsible for more than 30% of bitcoin’s daily turnover.
Bitcoin Volatility Surges
After tracking lower for most of the year, bitcoin’s volatility index has experienced a massive spike since Nov. 13, a session characterized by multi-year lows in investor anxiety. According to bitvol.info, the 30-day bitcoin volatility index rose to 3.94% on Wednesday, the highest in over six months.
While markets have stabilized somewhat over the past 48 hours, definitive signs of a bottom being reached remain elusive. The leading digital currency touched 14-month lows earlier in the week, as prices tested the $4,000 level for the first time since September 2017.
A prolonged downturn could place significant pressure on miners, whose operations depend on bitcoin’s price maintaining a break-even rate or higher. Although not exactly uniform, most analysts consider the break-even rate for most bitcoin miners to be at $6,000-$7,000.
The mining community has also been pulled into different directions following the highly contentious hard fork of bitcoin cash. The bitcoin.com pool has already diverted all of its energy to mining BCH as Roger Ver and the bitcoin ABC camp battle for control of the network. Interestingly, the hard fork itself has been one of the biggest factors behind bitcoin’s sharp decline over the past nine days.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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