The decline of bitcoin intensified on Thursday, as prices fell crept below $6,600 for the second time this week. In the process, the world’s no. 1 digital currency has become exposed to a major bear-market reversal that could drag the rest of the market with it.
BTC/USD Price Levels
It has been a volatile week for bitcoin, with prices fluctuating between a low of $6,425 and a high of $7,531. On Thursday, prices bottomed at $6,590, bringing the digital currency closer to the recent swing low.
BTC/USD was last seen trading at $6,813 for a total market cap of $115.3 billion. Trade volumes held relatively steady for much of the day, with more than $5.6 billion in BTC exchanging hands. Binance and Bitfinex were the largest markets for bitcoin trades at roughly 6-7% each.
Institutional Money Has Left the Room
Bitcoin’s dramatic price reversal since the start of the year tells an important story: it means speculative money is flowing out of the asset class for the first time since the bull market re-emerged in early 2017. Even when regulatory risks are factored, bitcoin’s fundamentals haven’t changed very much since December, when prices were edging closer to $20,000. If anything, the fundamental picture has improved with the implementation of Lightning Network, as well as growing institutional support for crypto assets.
While many investors long for the glory days of tenfold growth, bitcoin’s prolonged correction suggests pump-and-dump chasers are on their way out – at least, for now. Speculation is still part of the cryptocurrency market (it exists everywhere), but to a far lesser degree than just a few months ago. Like the dot-com boom of the late 20th century, many of the crypto assets getting multi-billion-dollar valuations didn’t deserve it from a purely fundamental perspective.
At the time of writing, only 19 cryptocurrencies had a valuation of $1 billion or more. This figure was much higher at the start of the year as speculation in altcoins reached an all-time high.
This isn’t to say speculators have permanently exited the market. They will most likely return as institutions and day traders enter the space with more conviction. As the correction continues, only the coins with long-term value will receive investors’ attention – and their money. This will work in bitcoin’s favor.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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