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27.11.202012:02 Prehľad analýz forexového trhu: Bitcoin has fallen by 13%. Is it a burst bubble or just noise against the background of a "bullish" trend?

During the trading session yesterday, the price of bitcoin fell by 13%, Ari lost more than 25%. Even before the close of yesterday's session, analysts considered this as the worst result for digital currencies since the beginning of the COVID-19 pandemic.

Exchange Rates 27.11.2020 analysis

At the beginning of US trading on Wednesday, the price of bitcoin was as close as possible to historical records reaching $ 19,500. Afterwards, the digital coin began to correct and a couple of hours later, it fell to $ 1,500 in the Asian session. After four hours of consolidation, the market was flooded with a second wave of sales and the value of bitcoin collapsed by another $ 1,500. As a result, the price of the main digital currency fell to $ 16,814 per coin.

However, hard times have come not only for BTC but also for many altcoins. So, Ethereum, XP and Ripple were trading in the red, which lost almost 30% at the end of the session yesterday.

Exchange Rates 27.11.2020 analysis

Experts say that the main reason for such a grandiose collapse in prices is the prospects for strengthening regulation of cryptocurrencies and profit-taking after a spectacular growth (over the past nine months, the cost of bitcoin has jumped by 250%).

It is known that in the near future, the US authorities are considering the possibility of passing a law that deprives digital transactions of the anonymity status on which the cryptocurrency principle is based. This desire of the trump administration to attack the market of digital coins could well be a significant reason for their collapse.

Quite often, experts call the mass liquidation of positions with leverage on large derivatives exchanges a possible reason for the fall of bitcoin. So, the amount of positions liquidated on crypto derivatives amounted to $2 billion over the past days. And in the last 12 hours alone, the mark has exceeded $1.6 billion.

Against the background of these events, the financing rate increased to 0.098% which indicates excessive use of borrowed funds and overheating of the market. The indicator collapsed against a sharp decline in the price of BTC. The resumption of the ability to withdraw funds from one of the largest cryptocurrency exchanges in the world could also accelerate the negative dynamics which gave a sharp boost to sales.

By the way, analysts attribute the recent huge rise of digital currencies to their growing popularity on the US stock markets. Other experts explain the steady growth of cryptocurrencies by the devaluation of the dollar, which is carried out by the Fed.

The PayPal Payment System added additional attractiveness to bitcoin, allowing customers to use digital currencies, thereby significantly increasing the availability of its purchase for a large number of people around the world. So, the current base of the main virtual currency before the introduction of PayPal was 100 million users, after that, it went to three times more. In addition, Fidelity Investments launched a Fund focused on the main digital coin and Square and MicroStrategy announced their major investments in BTC.

In General, experts support the desire of investors to invest in digital assets like bitcoin, confirming that such technologies will be actively developed in the future and will defend their niche in the global financial system. At the same time, other cryptocurrencies are significantly inferior to bitcoin both in terms of technology and in terms of their capitalization according to analysts. But if we still consider altcoins from the point of view of adding to the investment portfolio, the ideal ratio is: BTC – 80%, other currencies – 20%.

Interestingly, Citi suggested in mid-November that bitcoin could soar like gold in the 1970s of the last century and by the end of 2021 - 1 digital coin will be worth around $320,000. Deutsche Bank generally stated that the main cryptocurrency is already replacing gold as a hedging tool for various risks.

However, today many experts believe that digital currencies are significantly overbought and they need a correction. In this regard, their current decline was quite obvious and expected. It is possible that after the correction, the situation will level out and cryptocurrencies will be able to continue their growth.

Thus, more pessimistic experts compare today's price collapse with the events of 2017 to 2018, when the cryptocurrency bubble in the market burst with a bang. As a confirmation of the identity of the situations, they point to the increased activity of retail speculators, which often signals that the market is forming a top.

In contrast to analysts' opinion, many investors believe that by the end of the year, the main digital currency will grow to $20,000 to 25,000 and they explain its temporary fall as a logical short-term phenomenon after the maximum take-off. After all, any asset that is able to grow by 250% from the March lows can afford a correction. And based on the historical aspect, those who did not succumb to speculative panic in the market two and three years ago, remained in a significant gain. If you will remember the previous bubbles, the bitcoin was fixed in much higher positions than before the bubble.

Irina Maksimova,
Analytical expert
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