Bitcoin really hasn’t done well over the past two days. After managing to tap $9,200 on Saturday, the cryptocurrency started to trend lower and lower, falling through support levels as if BTC was a hot knife going through butter.
At the worst of the weekend sell-off, BTC traded at $7,700, marking a nearly 17% decline from the $9,200 established just 36 hours earlier. Notably, since $7,700 was tapped for a few minutes, Bitcoin has recovered to $7,900, showing some strength for the first time in almost two days.
Per data from Skew.com and other cryptocurrency data providers, over $200 million worth of BitMEX long positions were liquidated during this crash, making it absolutely clear that the move caught many traders off guard.
Bitcoin Falls In Tandem With Traditional Markets
Although many in the cryptocurrency space make a fuss about how Bitcoin is inherently disconnected from traditional markets, this latest drop saw BTC fall in tandem with equities and commodities — something that seemingly disproves the narrative that Bitcoin is meant to be a digital store of value.
Case in point: Bitcoin’s strong loss comes as oil futures have posted a 30% loss ahead of the Monday open and as the S&P 500 and Dow Jones futures have fallen 5%, seeing their worst performance in years due to fears of the coronavirus outbreak and the potential knock-on effects of the crash in oil prices.
With many fearing that the situation with oil and the coronavirus will only get worse, some fear that stocks could sell-off further, meaning so could Bitcoin.
Analysts Are Buying Bitcoin Now: Why?
Interestingly, despite Bitcoin’s growing correlation with the downtrending traditional markets, a number of prominent cryptocurrency traders have said that they’re looking to buy Bitcoin (or already have) around $7,700.
Case in point: cryptocurrency trader Mayne remarked that “if you want to catch the knife,” referencing the vertical-shaped candle Bitcoin has printed, “this is where you do it,” noting that the high-$7,000s — which is where there exist technically-important Fibonacci Retracement levels — are where Bitcoin has found support in the past.
If you wanna catch the knife this is where you do it IMO. pic.twitter.com/b6GxBu4F95
— Mayne (@Tradermayne) March 9, 2020
Indeed, $7,700 may be a seeming point at which Bitcoin’s sell-off will bottom.
Byzantine General noted that the cost of production of Bitcoin and the average cash flow of miners have converged at the $7,700 level; this is relevant because the average cash flow of miners, as marked in the chart below, predicted Bitcoin’s bottom three times in November and December of last year, then once before in December 2018.
Both the $BTC production cost and average miner cash flow arrive at the 7700 level.
This definitely isn't an important level or anything 😏 pic.twitter.com/5SF0V0LczA
— Byzantine General (@ByzGeneral) March 8, 2020
Furthermore, industry investor Josh Rager remarked in an update posted to his Telegram channel that there exists a Point of Control and horizontal support for Bitcoin around $7,700 to $7,995, making it logical that the cryptocurrency could find a bid in that region.
Fundamental Trend Remains Strong
Even if Bitcoin falls further from here, failing to find support at $7,700 as the abovementioned analysts have suggested, the cryptocurrency’s underlying fundamentals remain decisively bullish.
Namely, the difficulty of the Bitcoin market — how hard it is for miners to solve blocks — is about to see a gain of 7% when the algorithmic adjustment takes place today.
PlanB, the pseudonymous analyst behind the famed stock-to-flow model, recently shared this bullish statistic (currently an estimate, though its unlikely to be wrong), writing that there is “no sign of weakness two months before the halving.”
This optimistic statistic shortly after the hash rate of the Bitcoin network — the amount of computational power that is allocated to processing blocks — hit a new all-time high of 136 exahashes per second.
Also, just last week, as detailed by Blockonomi, the Federal Reserve implemented an emergency rate cut that brought the central bank’s policy rate down 50 basis points. Many in the cryptocurrency space have taken this as a sign that monetary policy is failing, setting the stage for a new entrant like Bitcoin… or gold.