Bitcoin drops by almost 30% in just a few hours

Bitcoin price has fallen aggressively lately, extending its latest losses and pushing itself below $6,000 for the first time this year.

Bitcoin declined to as little as $5,678.14 around 6:45 a.m. EST, CoinDesk data shows.

At this point, bitcoin was down approximately 29% from yesterday’s high of $7,984.60, additional CoinDesk figures show.

The world’s leading cryptocurrency is certainly not the only asset that has been having a hard time recently.

At the time of writing this article, the top ten cryptocurrencies listed on CoinMarketCap have been colored in red.

Shares were also suffering, as the benchmark S&P 500 index was down more than 6% for the day at the time of this writing, Google Finance data shows.

Bitcoin’s Recent Price Drop

Denis Vinokourov, head of research at London’s digital asset firm Bequant, noted that the market has declined “sharply” in the last 24 hours, with bitcoin falling more than 20% in an environment characterized concerns about coronavirus, United States President Donald Trump’s latest travel restrictions and panic-driven selling.

He noted that the desire of investors to sell off their holdings triggered “a liquidity crunch as the cost of capital spiked up across trading spots.”

“This tightening was exacerbated by the fact that the market is highly dominated by sell-side liquidity providers/market-making firms, with only a limited buy-side demand,” added Vinokourov.

Safe Haven Concerns

Because bitcoin has been falling during times of widespread concern over the coronavirus pandemic, “many are disappointed” that the digital currency “has not been acting as the ‘safe haven’ it was promised to be,” said Kiana Danial, CEO of Invest Diva.

“However, a quick look at gold prices shows that even gold has not been able to live up to its ‘safe haven’ standards as it has dropped significantly over the past few days,” said Danial.

She elaborated on this situation, stating that:

“To me, this just suggests that Bitcoin has been caught in the Coronavirus global turmoil along with all other assets where investors are no longer searching to invest at all and prefer to keep cash in case of a doomsday scenario.”

Technical Support

While bitcoin has suffered some notable losses recently, the digital currency could recover shortly, according to the technical analysis provided by a few specialists.

“Bitcoin is currently trading in a very strong support zone between $5,600 and $6,200 and is likely to bounce back from here,” said Joe DiPasquale, CEO of cryptocurrency hedge fund manager BitBull Capital.

Danial offered a similar perspective, stating, “The Fibonacci retracement level tracing the uptrend that started in February 2019 and ended in June 2019, suggests the current support level is at around $5,700.”

“This level also falls on a previous resistance back in April 2019 and acted as support multiple times in 2018 and 2017,” she noted.

While bitcoin might have strong support, “the approaching week will be crucial in establishing a ground for this latest drop,” said DiPasquale.

“If Bitcoin closes below $5,500, after that $5,000 would be tested extremely quickly,” he stated.

“The upside, on the other hand, remains limited to $6,500 and $7,000 for now,” concluded DiPasquale.