Bitcoin Plunges 19% in Reaction to Elon Musk, Yellen Sentiments
Bitcoin prices tumbled as much as 19% in a violent sell-off Monday, the biggest of the year in dollar terms with a loss of more than $10,000, initially testing the resistance lines of $45,000 before marginally recovering and settling around $51,000 according to data from Crypto exchange bitfinex.
This comes just a day after the virtual currency hit a record of $58,042, bringing its year-to-date gain to over 100%. On Friday, it reached a market capitalization of $1 trillion .
Tesla CEO Elon Musk who has for long been seen as a vocal supporter of the cryptocurrency, most recently describing it as “a less dumb form of liquidity than cash.” On Saturday, Musk tweeted that the price of bitcoin seemed high, most likely being the cause of the decline. Musk’s tweet was part of a reply to a tweet from Peter Schiff, chief market strategist for brokerage firm Euro Pacific Capital, about the value of Bitcoin versus gold-backed currency.
The drop seemed to have accelerated even further as U.S. Treasury Secretary Janet Yellen described bitcoin as “highly speculative asset” that is extremely inefficient for transactions. Speaking at a New York Times event, Yellen called the amount of energy consumed in processing those transactions “staggering.”
Indeed, bitcoin has seen a staggering price rally over the past four months, rising from $10,000 to nearly $60,000, with just one bull market correction in the second half of January.
Bitcoin formed a short-term top, before the price started a sharp decline below the $56,000 level. BTC broke the key $55,000 support level and the 100 hourly simple moving average to move into a bearish zone. There was a break above the $50,000 and $52,000 levels. The price even climbed above the 50% Fib retracement level of the downward move from the $58,350 swing high to $45,000 swing low
On the upside, If BTC remains stable above the $50,000 level, it could make another attempt to settle above $54,000. The first major resistance is near the $55,000 level and the 100 hourly Simple Moving Average (SMA). To start a fresh increase and move into a positive zone, the price must clear $55,000. The next major resistance sits near the $57,000 level.
Ethereum, the second largest cryptocurrency by market capitalization faced an even steeper decline, having fallen nearly 25% to $1,550 since climbing above $2K over the weekend.
The Bullish trend spotted in ETH was unable to continue higher on Monday and ETH prices have largely been range-bound below $1.9k. The consolidation could be what bulls need to build fresh momentum, in which case another leg up could see ETH/USD surpass the recent peak. On the flip side, bears could push prices to lows of $1,653.
ETH/USD was trading around $1,694 at the time of this writing, perched just above the base of a price range within which it has traded for most of the past 8 hours. The price action follows a swift reversal from ETH historic peak of $2036. The technical picture for ETH/USD suggests the second-ranked cryptocurrency remains in an uptrend.