Bitcoin looks set to end its three-quarter losing run despite having dropped to $9,000 earlier on Thursday.
At 03:35 UTC, the leading cryptocurrency by market cap printed a low of $9,002, extending Wednesday’s 3.5% decline, according to CryptoX’s Bitcoin Price Index.
The pullback from Monday’s high of $9,800 to $9,000 could be associated with risk aversion in the traditional markets fueled by mounting trade tensions, renewed coronavirus fears and the International Monetary Fund’s decision to downgrade global growth forecasts.
Bitcoin has recovered a little to $9,250 at press time and is down 5% from Monday’s high.
Even so, bitcoin is still up 44% from the April 1 opening price of $6,428. A quarterly gain would be confirmed if prices hold above that level through June 30.
The cryptocurrency is on track to report its first quarterly rise since the April-June period of 2019. Back then, prices rallied by 163% to reach a high of $13,800, which remains unchallenged to date.
While bitcoin can be volatile – often adding or losing more than $1,000 in a matter of a few minutes – analysts do not see prices falling all the way back to $6,428 in the short term.
“We believe bitcoin will continue to trade sideways, albeit at a wider range with pulses of volatility scraping along time to time until it breaches the upper resistance of $10,000,” said Lennard Leo, head of research at Stack, a provider of cryptocurrency trackers and index funds.
The cryptocurrency is lacking a clear directional bias for the fifth straight week with prices still languishing in the restricted range of $9,000 to $10,000. Sellers failed to penetrate the lower end of the trading range early Tuesday.
“While no significant spot inflows were observed around $9,000, we are seeing strong bid volumes around $8,500, which could have provided the added layer support, causing the quick rebound to $9,250,” Neo told CryptoX. “The bounce has ratified our view that bitcoin is still consolidating, and a further steep crash to below $7k is highly unlikely.”
Meanwhile, Stack CEO Matthew Dibb said the fundamentals of bitcoin have not deviated much from the firm’s bullish view and that the recent dull trading could be due to increased investor interest in ether and decentralized finance (DeFi). “Many ‘crypto-native’ investors have been occupied in the decentralized finance (DeFi) market, hunting yield and arbitrage opportunities,” he said.
The recent speculative frenzy surrounding the lending protocol Compound’s new digital token, COMP, is the latest example of DeFi mania. Savvy traders are now executing complex arbitrage strategies to make gains on COMP’s meteoric growth.
Bitcoin’s quarterly gain could still take a knock if global stocks remain weak ahead of the close of June. The cryptocurrency’s positive correlation with equities has strengthened over the past two weeks alongside the resurgence of COVID-19 jitters in the markets.
The majority of the quarterly gain is the result of the strong rally seen in April. But the cryptocurrency has persistently failed to keep gains above $10,000 since early May, a sign of uptrend exhaustion.
In addition, increased miner outflows to exchanges are suggesting scope for a short-term price drop. As a result, a greater pullback cannot be ruled out. On the downside, major support is located at $8,300 (200-day moving average).
Disclosure: The author holds no cryptocurrency assets at the time of writing.
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