Bitcoin has experienced choppy trading this week, amid significant sell-offs on Tuesday as bearish “Bitcoin Down” sentiment took hold.
The world’s largest cryptocurrency was hit by the news that leveraged exchange Bitmex had begun issuing margin calls to its traders. The resulting drop in price has been described by some analysts as “a pretty rare event.”
The news appears to have temporarily derailed an anticipated rally in BTC, with prices falling as low as $7,998. This is a three-month low for bitcoin. At the time of writing, bitcoin was trading at $8,303.
According to some analysis, the sell-off could be the trigger for a wider decline in prices. This is projected to test support around $7,500.
CoinDesk analyst Omkar Godbole said the market was now in a confirmed bearish reversal. Indicators are suggesting there could be more trouble ahead for bitcoin bulls.
“BTC looks set to test support near $7,500, having confirmed a bearish reversal with a high-volume triangle breakdown on Tuesday. The cryptocurrency’s violation of the historically strong 55-candle exponential moving average (MA) on the three-day chart also favors a deeper price slide.”
There is also the suggestion that a so-called ‘long squeeze’, with investors selling long positions amid sideways trading, could have exacerbated the scale of the sell-off. Nevertheless, the news will confirm bull fears about bitcoin’s short term prospects. There is no sign of any let up over the next three days.
According to Godbole, a rise through $9,782 would see indicators flip back to bullish. This is an event he acknowledges may be some days away.
“The outlook would turn bullish if prices quickly rise above Tuesday’s high of $9,782, although that looks unlikely at press time.”
While the news is will not affect bitcoin and cryptocurrency users, it is likely to cause issues for speculators. In particular, those holding long positions.
There is still time for bitcoin to reverse. Many analysts are still predicting a return to stronger price rallies over the coming weeks.
But given the events of recent days, it looks as though bitcoin bulls would be wise to consider new investments. At least, until a bullish reversal looks more imminent.