Wednesday‘s huge sell-off in the cryptocurrency space saw the market’s capitalization fall by around $1 trillion from the high seen earlier
this month. The crash, fueled by stories of China widening its ban on
cryptocurrency usage, sent markets into a seemingly unstoppable spiral
lower, with a wide range of coins and tokens losing 40% to 50% in a
matter of hours.Later in the session, the market regained some composure
with losses pared-back, after a series of positive tweets hit the
screens. A tweet by Elon Musk saying Tesla has ‘diamond hands’ –
indicating that Tesla will not be selling its Bitcoin holding – turned
sentiment positive. Later another set of tweets by Justin Sun (2.7
million followers) showed the market heavyweight, and the owner of the
cryptocurrency platform TRON had bought $152 million of Bitcoin and just
under $136 million of Ethereum during the meltdown. Sun added, ‘I’m not
selling.To get more news about WikiFX
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While the market is now edging higher, it remains well below pre-crash
levels and the rebound may come back under pressure. Yesterday‘s
wipe-out has caused untold damage, not just to trader’s P&Ls but
also to market sentiment, a noted driver of cryptocurrency price action.
Price volatility is at extreme levels not seen before, despite the many
market crashes over the years, and this needs to dampen down if a
sustained recovery is to occur.
Bitcoin lead the fightback yesterday and currently trades either side
of $40,000 after hitting a Wednesday spike low of just over $30,000. One
market volatility measure, the Average True Range is shown at the
bottom of the chart, shows the 14-day range at $4,700, a level that
makes trading Bitcoin extremely risky. A period of consolidation is
needed before entering the market is justified, despite the CCI
indicator showing BTC in heavily oversold territory.
Ethereum, a notable market outperformer of late, broke below $2,000
for a brief time yesterday, before pulling back after running into a
cluster of prior lows and highs. The second-largest coin by market
capitalization hit a record high of $4,380 just over one week ago. Again
Ethereum looks heavily oversold and is flashing extreme levels of
volatility, but yesterdays blow-out candle top near $3,500 needs to be
regained before confidence can be restored.