Bitcoin (BTC) had a promising start to the week following the CME Bitcoin Futures Expiration, with Bitcoin rising to the long term resistance level at $12,000, and for a little while it looked like Bitcoin might finally break through that level.
However, things soon turned sour, and Bitcoin began to steadily decline, before crashing below the critical support level of $11,000 today. Notably, the $11,000 support level has been in place since late July.
Bitcoin declined as low as $10,500, but as of this writing Bitcoin has recovered slightly to $10,700. It remains to be seen if this is as low as Bitcoin will go.
It remains unclear why exactly Bitcoin has declined so sharply. It seems the most likely culprit is stocks have crashed, with the Dow Jones Industrial Average (DJIA) down over 800 points as of this writing. This is actually the sharpest decline in stocks since June. It seems Apple and Tesla stock are leading today’s stock crash, with major losses, which is a stiff reversal from the major pump that Tesla and Apple saw in previous weeks.
Indeed, there have been several times since the Coronavirus induced economic crash started that Bitcoin sharply declined at the same time that stocks were crashing. Basically, it seems that fear and panic in the stock market somehow translates over to the crypto market.
Another possibility is that major crypto mining pools are crashing the Bitcoin market with abnormally large outflows, i.e. sell offs of their inventory. That being said, maybe the mining pools just saw today’s economic headwinds ahead of time and were dumping while they still could.
Zooming out, it seems most likely that Bitcoin and stocks are linked, and therefore it will be important to watch the stock market to see if today’s crash continues, or if stocks stabilize and recover. Basically, if stocks keep crashing then further declines are likely on the crypto market, but if stocks recover, then the crypto markets will likely stabilize as well.