After attempting to break decisively past $10,000 for the second time in a week, Bitcoin was rejected, plunging as low as $9,200 for the umpteenth time in a matter of days.
BTC’s tepid price action has made some investors cautious that more downside for the flagship cryptocurrency is possible, citing the loss of the key $9,500 support.
One investor touting this forecast is the same individual who, in the middle of last year, predicted a retracement to $6,400 when the asset was rallying well above $10,000. The retracement took place almost down to the dollar, with Bitcoin bottoming very close to $6,400 approximately six months after his prediction.
Bitcoin Could Drop Towards $6,000s, Analyst Fears
Backing his prediction, the trader recently shared the chart below. It shows that Bitcoin’s price action over the past week is looking much like the price action at the $10,500 top in February of this year.
The similarities indicate that should Bitcoin trade as it did at the previous top, it will plunge towards the $6,000s by early June — just three weeks ago.
Bitcoin price chart from “Dave the Wave” (@davthewave on Twitter), a prominent cryptocurrency trader who has made some solid macro calls. He believes BTC will retest $6,400 in the coming weeks.
As reported by this outlet previously, the trader asserted in a separate analysis that Bitcoin is also bearish because the Moving Average Convergence Divergence (MACD) — a key trend/momentum indicator — crossed negative.
Historical crosses of the MACD into the red have preceded previous Bitcoin crashes. For instance, the indicator flipped red just weeks before BTC crashed from the $9,000s to $3,700 over the span of a week and also near the top of 2019’s bull run at $14,000.
Sell Pressure May Be Decreasing: Data
While there is the risk of a drop, data indicates that the number of BTC being held on exchanges is decreasing at a rapid clip. This should decrease the chance Bitcoin sells off strongly in the medium term.
As reported by NewsBTC, prominent Bitcoin developer and entrepreneur Jameson Lopp recently shared that per data from Coin Metrics, the amount of BTC held by both BitMEX and Bitfinex — the leading futures exchange and a top spot exchange, respectively — has “reached new lows following the March 12th crash.”
The amount of BTC held by BitMEX and Bitfinex has reached new lows following the March 12th crash. Bitfinex now holds 93.8K BTC, down from 193.9k on March 13th. BitMEX’s BTC supply is now down to 216.0K BTC, down from a peak of 315.7K on March 13th. H/T @coinmetrics pic.twitter.com/gesZ3QahcK
— Jameson Lopp (@lopp) May 12, 2020
Coin Metrics’ chart below indicates that Bitfinex now holds 93,800 BTC — not a small sum, but almost exactly 100,000 coins fewer than it held on March 13th. Similarly, BitMEX’s supply is down to 216,000 BTC from a March peak of 315,000 coins — again a decrease of almost exactly 100,000 coins.
The coins withdrawn have a value that amounts to over $1.7 billion.
Bitcoin being withdrawn from exchanges en-masse, which decreases the likelihood the owners of coins sell their holdings, decreases the market supply of Bitcoin. Assuming consistent demand, the decrease in the supply of an asset in a market should increase the equilibrium price, limiting a sell-off.
Featured Image from Unsplash
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Author: Nick Chong