Analysis: Where will the Bitcoin (BTC) price go after its sudden $400 drop

Analysis: Where will Bitcoin go after a 400 USD drop within 24 hours

The euphoria of Bitcoin (BTC) breaking the 5,000 USD barrier and surging to highs of over 5,200 USD turned out to be short-lived. The whole market dropped significantly from its short-term highs. Many coins and projects even dropped in the double digits losing nearly all the gains made in the last two days.

The community is still trying to make sense of it

Speculation has been rampant on YouTube, Reddit and Bitcoin Talk on whether the bear market is finally over or whether this is just another spike upwards that might lead to even lower lows than before.

Many investors have been pretty bullish on Bitcoin and crypto in general over the past few weeks and even former bears have chimed in, that we have reached the bottom and thus the time to buy has come. This is surprising as some of these bears have been betting against Bitcoin for several years and only recently have changed their tune even before Bitcoin’s hike in price a few days ago.

What caused the short-lived Bitcoin spike?

But was the reason for Bitcoin’s spike just a few days ago? While some point at the general sentiment becoming more positive, the catalyst seems to have been a large buy order more than 100 million USD to purchase Bitcoin. Simply throwing such a large order on the market cleaned the order book resulting in a multi-hundred-dollar surge that sent many bots and traders into FOMO accounting for the sustained growth to 5,200 USD by the 3rd of April.

Following the general proverb that a large spike in one direction is always followed by an at least minor correction, we have dropped by nearly 400 USD by the end of the 4th of April. The question now is, whether the price stabilizes above previous levels or if we drop to levels below the previous plateau.

The altcoin prices are falling too

Currently the prices are still falling across the board and only a handful of Top 100 currencies have remained in the green today. These few are Ravencoin, IOST, Maximine Coin, Enjin Coin, Project Pai, Theta, Insight Chain, Mixin, Revain, Qubitica, REPO and aelf.

None of the Top 20 have posted positive gains today and out of the Top 100, only REPO has had significant gains.

The most interesting project of these gainers going by the hype surrounding it is Enjin Coin. Interestingly this coin has not seen a major spike in the price this time around and has not suffered a major drop, either. Many investors have Enjin Coin on their radar because of the recent inclusion of Enjin’s crypto wallet on Samsung’s new Galaxy S10 series.

Most of the Top 10 Coins have even dropped in the double digits with Cardano and Bitcoin Cash leading downward bound pack with losses of -14,59% and -13,89% respectively.

What is more, is that the drop has still not ended. While it does not seem like there will be a drop of several hundred dollars in the next few hours, it seems like the market might still lose a few more percents. The constant sell pressure is likely caused by investors itching to lock in some gains to cover previous losses at these levels.

What does all this mean for investors?

There are two options:

  • This is a correction: This means the market will soon stabilize and possibly continue its sideways or upwards trend.
  • This is not a correction: This means that the market will fall further, and the stabilization of prices will happen at lower levels that may even be below previous lows.

For investors looking to get into the market or investors in the process of building positions, this means that a cost-averaging approach will likely yield the best results and buying on the way down and not trying to time the bottom. This is because at this moment in time, it is not clear whether this will be a small correction or if we will fall even further. In the first case, not buying some crypto now will mean missing an opportunity and investing too much now will mean missing an opportunity if the prices drop even further. The savvy investors will therefore likely buy in small amounts along the way to the bottom not worrying about whether they time the bottom correctly.

Looking at social media, forums and news sites it does not seem like the optimism that recently has been gaining traction has lost momentum and the stream of good news around everything crypto is continuing.

Downwards, the old resistance points of around 4,000 USD and 3,100 USD are still there. Looking upwards, the next sell wall of investors planning to sell lots of Bitcoin is located at 6,000 USD.

For many analysts, this 6,000 USD sell wall is the real bull market test. Should the market reach and break this multi-thousand coin sell wall, the flood gates might open to gains similar or even higher than what we have seen at the end of 2017.

What to watch out for

As the market still has not decided on which direction to take, it is difficult for investors to decide on a definitive path of action. It is important, however, to keep a tab on the news, to see whether any major news is coming out that might disrupt the market. On the positive side, these could be significant investments of large companies going into crypto. On the negative side, investors should watch out for exchange hacks or excessive regulation through governments.

Another important aspect of a sound investment decision is avoiding FOMO (the fear of missing out) as far as possible. The two days after the Bitcoin mega buy have shown that many investors are quick to jump the gun and throw money in when something shifts the price of Bitcoin or the market in general. Twitter, YouTube and forums exploded with people announcing they were buying crypto and general euphoria that the market will be going up significantly. While it is ok to be excited when the prices go up, it should not influence investment decisions on an emotional level.

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