The bitcoin price has dropped by more than $600 within three minutes from $10,069 to $9,440 on July 27 in an abrupt pullback.
Against the U.S. dollar, at its lowest point on the day, the bitcoin price slipped by well over 7.5 percent to $9,333.
Factors behind the drop of the bitcoin price
Throughout the past two weeks, the bitcoin price has shown relatively high volatility above key support levels, unable to break above strong resistance.
According to global markets analyst Alex Krüger, the bitcoin price has had important support levels at $11,300, $11,000, $10,800, $10,300, and $9,500 to defend and within a short time frame, those levels were broken down due to intensifying sell pressure.
Following the dip of the bitcoin price below $9,500, Krüger stated that the next target for bitcoin remains at the mid-$8,000 region, at the $8,500 to $8,600 range.
“The range is now breaking down. 8500-8600 is the next logical stop and first major buying area. Chart favors downside yet the upside is IMO considerably larger. Keep the big picture in mind,” he said.
Josh Rager, a cryptocurrency technical analyst, similarly suggested the possibility of bitcoin dropping below the $9,000 level in the near term, which has acted as a weekly support throughout the year.
“The ‘potential’ lower-high looks to be playing out with a price below $9,690. Eyeing price to make its way to sub $9K at the weekly support level to form a lower-low. Just trying to be fluid, not overly bearish as 4-digit BTC is still a gift,” said Rager.
The price movement of bitcoin has been largely technical since mid-July with no clear fundamental factors triggering a decline in sentiment around the cryptocurrency market.
The highly anticipated test launch of Bakkt was initiated without further delays and investment firms like Grayscale have reported a consistent inflow of institutional capital since early 2019.
However, there exists potential negative fundamental factors for the market such as the regulatory uncertainty in the U.S. market, which has been a key market for cryptocurrencies as an emerging asset class.
Circle, one of the biggest cryptocurrency companies in the global market, moved some of its operations outside of the U.S. following the remarks of Treasury Secretary Steve Mnuchin and U.S. President Donald Trump on cryptocurrencies.
“Today, we’re expanding our global offerings with the launch and regulatory licensing of a new subsidiary in Bermuda. We plan to serve non-U.S. Poloniex customers with our new Bermuda operations, and we expect to offer many new digital asset services from Bermuda over time. We will also continue our existing operations in the U.S., Ireland, the UK, and Hong Kong,” Circle CEO Jeremy Allaire said.
Several local reports have also indicated that U.S. regulators are preparing new regulatory frameworks for the cryptocurrency sector to prevent money laundering and the financing of illicit activities using crypto assets.
Growing efforts of U.S. regulators to tighten their oversight on the cryptocurrency sector as well as rising sell pressure from bears are likely to have contributed to the downward movement of bitcoin in the past week.