Bitcoin dips towards 59K, major cryptos follow — Quick Market Updates

On 17 November, bitcoin (BTC) dipped below $60,000 for the first time in three weeks. This was the latest dip in the price movement since 15 November, which lost 10% of its value. Other major cryptocurrencies followed this pattern, with Ethereum (ETH) nursing a similar loss while Polkadot (DOT) experienced a slightly greater loss.

Why the dip?

It’s not possible to pinpoint exactly why more selling pressure occurred on Bitcoin. However, several events occurred simultaneously during the past three days, which may convinced some traders to temporarily liquidate.

• Twitter’s Chief Financial Officer Ned Segal said in an interview with The Wall Street Journal that investing some of Twitter Inc’s corporate cash into crypto assets “doesn’t make sense right now”. Segal cited volatility in the digital currencies as one of the reasons why the company would not invest their corporate liquidity into assets like bitcoin. 

• Taxation in the crypto trading world is also one key concern of US businesses, whose profits come from buying and selling crypto assets. According to Coindesk, President Joe Biden signed a bipartisan infrastructure bill, which allegedly contains a controversial cryptocurrency tax reporting requirement. In essence, the bill is still ambiguous on the term “broker”. This term could capture entities like crypto miners and parties that don’t directly facilitate transactions.

• A (relatively) old news may take time to trigger concerns. On 21 October, it was revealed that victims of the Mt Gox crypto exchange collapse would receive over $9 billion in bitcoin. This is to remedy the losses incurred from a massive security breach to the crypto exchange seven years ago. Fearing a supply shock, the price of BTC dropped down by as high as 10% after the press release. In spite of this, the price did recover after a week.

• Bitcoin has completed the Taproot upgrade. This potentially allows for a much cheaper transaction fee and may pave the way for smart contracts on Bitcoin. Historically, prices build up as short-term investors accumulate assets while the market anticipates upgrades and other news. When the news gets released, the investors profit off the unrealised gains. In the market, this is known as “buy the rumour, sell the news”.

These are not exact explanations on why the BTC price went down in November 2021. However, history has shown that news has a powerful effect on the crypto market. This explains why crypto assets like bitcoin are quite volatile.

What to do about it?

Various kinds of people react to this news differently. Crypto beginners who have recently bought some bitcoin may panic sell after seeing a 10% unrealised loss. On the other hand, veteran investors used this opportunity to “buy the dip”.

Twitter user @venturefounder reported that the third-biggest bitcoin whale has added 207 more BTC at $62,000. “Bitcoin whale” is crypto lingo for owners of a wallet that holds large amounts of bitcoin.

Other bitcoin investors believe that the longer-term bitcoin uptrend is still intact. Investors who use technical indicators can see that the bitcoin price nears the 50-day moving average support line (white line, below). Technical traders would often use this level as an entry point for buying.

Bitcoin has also lingered around the $60,000 level in the past three months. This level apparently has a psychological significance to investors and traders alike. We can see that the price ‘tested’ this price level in the past month. In trading lingo, this means that sellers could only push the price so far down around this level).

While technical indicators do not guarantee the future performance of any given asset, it increases the chance of speculation happening in our favor.

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