By CCN Markets: In the past 24 hours, the bitcoin price has dropped from $7,900 to around $7,500 by more than five percent against the U.S. dollar in a minor pullback in the crypto market.
The bitcoin price has dropped by around five percent in the past 24 hours (source: coinmarketcap.com)
Within the last seven days, the bitcoin price has fallen by over ten percent, which has led technical analysts in the crypto market to ponder about the possibility of an extended pullback despite the market’s positive macro landscape.
30% pullback for bitcoin a possibility?
According to a technical analyst known as Crypto Thies, the relative strength index (RSI) of bitcoin touched the 92 to 95 range, which historically has led the price of the asset to drop by around 30 percent.
Throughout the past four years, bitcoin has demonstrated a tendency to experience a pullback of 30 percent on average following an extended rally.
“Every-time BTC has touched 92-95 RSI on the 3D chart since 2015, price dumps over 30% over the following months, before continuing onward. We touched the same RSI range recently. Will this time be different? That would imply a touch to at least $6.5k if so,” the analyst said.
The past performance or trend of an asset is no guarantee of the future performance of the asset, especially in the case of major crypto assets as the structure of the market has evolved significantly since 2016.
However, considering that the bitcoin price is still up by more than 100 percent year-to-date against the U.S. dollar, by nearly three-fold at its yearly peak, strategists generally agree that a pullback would be healthy for the market.
The valuation of the crypto market is down by $7 billion in the past 24 hours (source: coinmarketcap.com)
Traders have started to observe the low $7,000 region as a potential target of re-entry amidst an ongoing short-term correction in the crypto market.
“Again, I’d feel a lot more bullish after more of a reset. Looking for a strong bounce near the 50% retracement of this move,” one trader said.
Positive macro factors
The recent pullback in the crypto market is mostly recognized to be a technical move subsequent to a large upside movement in a short time frame.
On a macro level and in the medium term, positive factors exist on the horizon that may lead to the improvement of sentiment around the market.
The developer activity of bitcoin in the past four years has consistently been on the rise, with the total number of peer-reviewed and merged codes having increased by nearly three-fold.
Developer activity in the bitcoin open-source community is on the rise (source: Pierre Rochard)
Christine Lagarde, the managing director at the International Monetary Fund (IMF), has said in a recent speech at the G20 High Level Seminar entitled “Our Future in the Digital Age” that governments are encouraged to integrate different approaches to regulate crypto and promote development, calling for stability and development of fintech.
”Integrating different national approaches to crypto-assets, non-bank fintech intermediaries, and the governance of data is crucial if we are to harness fintech’s potential to promote greater financial inclusion and development. Yet at the same time, we have to find a way to preserve financial stability and integrity, protect consumers, and increase financial literacy,” said Lagarde.
With major economies in the likes of Japan, South Korea, and the U.S. moving toward the imposition of practical regulatory frameworks, the public’s perception of the crypto sector could shift from an experimental industry to an established market.
Although technical analysts foresee a pullback in the near-term as a result of bitcoin’s rapid price movement in recent months, in a longer time frame, analysts remain optimistic about the trend of the asset class.
Author: Joseph Young
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