Market Wrap: Traders 'Buy the Dip' as Bitcoin Hovers at $9,000

Bitcoin fell for a second day as sentiment grew bearish, though some traders say they’ll buy the dip.

AccessTimeIconMay 21, 2020 at 9:14 p.m. UTC
Updated Sep 14, 2021 at 8:44 a.m. UTC
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Bitcoin fell for a second day, extending a downdraft triggered by Wednesday’s revelation that a member of the cryptocurrency community from the blockchain’s earliest days in 2009 had moved a long-dormant cache of coins. 

As of 20:30 UTC (4:30 p.m. ET), bitcoin (BTC) was trading at $9,044, a loss of 5.6% over 24 hours. 

Bitcoin remains well below its 10-day and 50-day technical indicator moving averages — a signal of bearish sentiment. 

At 14:00 UTC (10 a.m. ET) the world’s oldest cryptocurrency began experiencing high selling volume on exchanges including Coinbase, dropping bitcoin below $9,000 for the first time since May 13.

Bitcoin trading on Coinbase since May 19
Bitcoin trading on Coinbase since May 19

While the market appears to have turned bearish, Rupert Douglas, head of institutional sales at asset management firm Koine, said he planned to “‘buy the dip” — a popular phrase for accumulating an asset when prices drop in the belief that they’ll soon start going up again. 

“In a way I was hoping for this,” Douglas said in an email. “I'm a buyer at $9,000, as this is shaking out the weak longs before taking it higher.” 

Volatility in the notoriously fickle bitcoin market has declined since collapsing in March, when the devastating economic toll from the coronavirus started to become clear.   

“I wouldn’t call this a dump,” Darius Sit, managing partner at crypto quantitative fund QCP Capital, told CoinDesk via a Telegram message. “It’s nowhere near statistically significant.”  

Bitcoin volatility since 1/1/20
Bitcoin volatility since 1/1/20

The price drop could take a toll on the profitability of bitcoin miners, already hurting from a revenue cut following last week’s rewards halving. The miners have had to rely more on transaction fees to maintain revenue. 

Bitcoin miner revenue from fees the past three years - dotted line is halving event
Bitcoin miner revenue from fees the past three years - dotted line is halving event

Fortunately, fees are up post-halving, said Marc Fleury, CEO of digital asset brokerage Two Prime. 

“Transaction fees associated with moving bitcoin around have increased from 60 cents to upwards of $5, providing some income for the miners,” he said. 

Fleury said many bitcoin miners are counting on a price increase to stay profitable. "This has historically happened in the past two halvings, within a span of 18 months,“ said Fluery. “It will take some time for the market to adjust.”

Other markets

Digital assets on CoinDesk’s big board are in the red Thursday. The second-largest cryptocurrency by market capitalization, ether (ETH), lost 5.6% in 24 hours as of 20:30 UTC (4:30 p.m. ET). 

Ether trading on Coinbase since May 19
Ether trading on Coinbase since May 19

The biggest losers in 24-hour trading were cardano (ADA) slipping 7.6%, iota (IOTA) losing 6.5% and neo (NEO) down by 6.1%. All price changes were as of 20:30 UTC (4:30 p.m. ET) Thursday.

In the commodities sector, oil is trading up 1.4%, with the price of a barrel of crude at $33 at press time. Oil has experienced a wild ride in 2020, up 101% the past month yet still down 44% for the year to date. 

Gold is in the red today, with the yellow metal falling 1.2% to $1,725 at the close of New York trading. 

In the U.S. the S&P 500 fell less than 1% on the day, but still up over 2% since Monday despite U.S. jobless claims coming in at over 2.4 million for the past week, the seventh weekly increase. 

U.S. Treasury bonds slipped Thursday. Yields, which move in the opposite direction as price, were down most on the two-year bond, falling 5.6%.

In Asia, the Nikkei 225 index ended its trading day down less than a percentage point on losses in the real estate and transportation sectors. Trading of Europe’s largest public companies by market cap on the FTSE Eurotop 100 index was also down less than a percent, dragged down due to continued coronavirus uncertainty

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