Profit or Panic? Market drops 10% in a flash crash
There is a call of fear and panic again as the crypto market faces another big daily drop. A large number of top tier cryptocurrencies have experienced major bull runs, a pullback was expected and warranted.
Cryptocurrency move lower is part for the course
Bitcoin, Ethereum and the broader cryptocurrency market experienced a significant flash crash during Thursday’s trading. Prices had been trading in a very congested range ever since Sunday’s jump. The move today, while certainly painful for any ‘hodling’ crypto investor/speculator, is certainly par for the course – and the behavior and nature of the move is extremely common. Just as we saw a massive jump in price on Sunday, that same move happened today, except down. What was the distinguishing feature? A single entity pushing price in an extremely short period of time. If we look at the chart above, we see the initial push lower from 4001.73 to 3813.98 in a 5-minute span. Prices then consolidated – volume was almost non-existent. Price sat, literally, right on top of the upper trendline before it’s next drop. The next major dive lasted for a total of 10 minutes and dropped from 3777.14 to 3560. Price halted exactly on the 61.8% Fibonacci retracement level from the most recent swing high of 4239.39 to the most recent swing low of 3185.17. Note that I did draw the retracement all the way to the extreme swing low – that is the incorrect way to draw an accurate Fibonacci retracement. And regarding Bitcoin’s move – considering the proximity that price was trading at on the daily Ichimoku chart, this move down was also a highly probable event – Bitcoin is trading near the bottom of the cloud, which is a strong resistance area.
It’s profit, not panic
While the moves today do seem ugly – well, they are – it’s also not a surprise and shouldn’t be a surprise. A significant number of high market cap cryptocurrencies have moved up significantly in the past 30 days. Cardano, which has lost over -18% at one point during the day, is a perfect example of this. Cardano has been in an uptrend since December 15th, 2018 – nearly 30 days straight of a bull move. During that rise, Cardano has gained 101.72%. So a pullback of even 30% is warranted. Litecoin has also experienced a significant rise in both time and price. For over 25 days, Litecoin has rallied from 22.17 to the swing high of 41.27 – an 86.15 gain against the days -13.56% move lower. In any other major market, these moves would be scary – but for cryptocurrencies these moves are normal. It’s not surprising that some people may want to take some of their positions off the table during this most recent bull run. And the move today doesn’t mean that we will continue to sell off to create lower lows (or lows below the December 2018 low). It will be very interesting to see if traders buy this dip – or any dip lower. If that does happen, then we can assume we are in a new buyers market and a market where we can buy the dips instead of shorting the rallies.