Since July 10, the bitcoin price has dropped from $13,200 to below $11,000 within less than a week as the crypto market saw a minor correction.
In a sharp pullback, the price of the dominant crypto asset slipped by more than 16.6 percent, leading the rest of the crypto market to lose its valuation relatively quickly in a short time frame.
Despite its recent correction, if the bitcoin price stays below the $11,000 level in the upcoming days, which has acted as an important support level for the asset, some traders expect the short term trend to turn bearish.
Bearish scenario for bitcoin
The sentiment around bitcoin and the crypto market, in general, remains mixed. Many investors have interpreted the statements of U.S. President Trump and Treasury Secretary Steve Mnuchin in varying ways.
As CCN reported on July 15, in an official briefing hosted at the White House, Secretary Mnuchin stated that FinCEN and other relevant financial authorities will tighten their oversight on the crypto sector.
“The United States has been at the forefront of regulating entities that provide cryptocurrency. We will not allow digital asset service providers to operate in the shadows and will not tolerate the use of the cryptocurrencies in support of illicit activities.”
“Treasury has been very clear to Facebook, to bitcoin users and other providers of digital financial services that they must implement the same anti-money laundering and countering financing of terrorism, known AMLCFT safeguards as traditional financial institutions.”
Some industry executives like Travis Kling, a former Wall Street portfolio manager and the founder of Ikigai Fund, said that the acknowledgment of bitcoin by Federal Reserve Chairman Jerome Powell and Secretary Mnuchin as a speculative store of value is a positive indicator.
“The Chairman of the Fed and the Treasury Security both agree that Bitcoin is a speculative store of value. Both of them, along with the President, agree that Libra and Bitcoin are two very different things. Wildly bullish,” he said.
In the long term, such an acknowledgement could certainly act as catalysts for the crypto market. However, in the short term, increasing scrutiny from regulators is expected, which could hinder the confidence of existing investors in the market.
I appreciate your concern about bad actors using cryptocurrencies, but please remember: technology is amoral.
All of it — electricity, cars, the internet — can be used for good or evil. And yet, it is the beating heart of human progress. We must push on.
— Jake Chervinsky (@jchervinsky) July 15, 2019
As such, traders like Nick Cote said that bearish bias remains until the $11,000 level is reclaimed with ease. Although bitcoin briefly recovered above $11,000 upon the release of the briefing, it has since fallen back to $10,700.
“Bearish throwback respected at $11,000 Bullish support respected at $9,700 Bearish bias remains until we re-claim the $11,000 level,” said Cote.
Earlier this week, Scott Melker, a crypto trader at Texas West Capital, said that a fully bearish case for bitcoin has not formed yet.
But, even in the unlikely scenario that bitcoin drops to $7,246, the trend of the asset would still remain bullish.
“Fib levels from the dead bottom to the recent top. $7246 would be a 61.8% retrace of this parabolic move up, which would still be bullish,” he said.
Alts take a hit
As the bitcoin price experienced a pullback, alternative crypto assets like Ethereum, XRP, LItecoin, Bitcoin Cash, and EOS have seen substantial losses against both bitcoin and the U.S. dollar in recent weeks.
Ethereum, for instance, fell from $310 to $226 in the past week by more than 27 percent against the USD.
Bitcoin Cash recorded a drop of around $100 from $415, similar to Ethereum and other major crypto assets.