On December 29, the Bitcoin price briefly surpassed $4,000, initiating a promising rally from around $3,600.
In the past 24 hours, the value of Bitcoin has retraced from $4,000 to $3,800, falling to $3,688 at the day’s lowest point.
The decline in the Bitcoin price led other major crypto assets such as Ripple (XRP) and Ethereum (ETH)to drop by a larger margin than the dominant cryptocurrency. The Ethereum price, for instance, dropped from $154 to $141, by over eight percent against the U.S. dollar.
Is Bitcoin Vulnerable to Drop to Mid-$3,000?
Throughout the past two weeks, CCN consistently reported that volatility in the range of $3,000 to $5,000 will have no meaningful impact on the mid-term price trend of the asset.
For Bitcoin or any other cryptocurrency to demonstrate a proper trend reversal, the market would have to recover by at least 70 to 80 percent. To rebound to November levels, the valuation of the cryptocurrency market would have to rise by 50 percent, from $130 billion to $220 billion.
In the short-term, the price of Bitcoin is likely to show a high level of volatility in the $3,000 to $4,000 range, with the possibility of dropping below the $3,500 mark.
DonAlt, a cryptocurrency trader, said prior to Bitcoin’s unforeseen rally on December 29 that the asset is unlikely to breakout of major resistance levels at $3,900 and $4,000 in a single daily price movement.
Following the struggle of BTC to enter the $4,000 region, the trader said:
Short hedged around 70% of my entire portfolio around $3,900, now going to enjoy new years in peace. I’ll be looking to rebuy the next support down below (~$3,400) or stop out once we close above ~$3,950.
A cryptocurrency technical analyst with the online alias “Hsaka” also emphasized that Bitcoin is currently showing a bearish bias and entering a long position anticipating the price of the asset to surge substantially in the short-term could be of high risk.
“Bias remains bearish below the pivot. Not looking to long until a clean break and retest,” the analyst said.
Given that the daily volume of both the cryptocurrency market and Bitcoin remain relatively high at $15 billion and $5 billion respectively, the entire market is expected to see the extension of wild volatility across the first week of 2019.
Ethereum’s Strong Performance
Since December 17, the Ethereum price has increased from $86 to $141, by more than 63 percent against the U.S. dollar. It has outperformed most major crypto assets in the past two weeks including Bitcoin.
But, Ethereum has tended to reflect the price movement of BTC with an intensified margin. Throughout November, as Bitcoin dropped from $5,000 to $3,500, Ethereum declined from $221 to $100, by more than 54 percent.
Depending on the short-term performance of Bitcoin, major crypto assets could demonstrate signs of recovery in the first month of 2019 or continue to experience a sell-off throughout the first quarter of next year.