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Bitcoin (BTC) fell substantially during trade on Friday and was recently trading below $21,500, down more than 8% over the previous 24 hours. The leading crypto by market capitalisation has declined by 13% during the past week.
Bitcoin Sells off Sharply
The fall began during the overnight trade, coinciding with unanticipatedly strong German inflation statistics. In July, Germany’s annual producer inflation rate reached an all-time high of 37%, above predictions of 32%. The producer price reflects the price of products and services sold by regional manufacturers. The German PPI data are comparable to the American PPI statistics. In contrast, the United States’ PPI reading for July was 9.8%.
According to the CME FedWatch tool, the probability of the U.S. Federal Reserve raising the federal funds rate by 75 basis points increased from 41% to 44.5% following the announcement.
Similarly, the price of Ether (ETH) decreased by 8% every day and 13% per week. Recently, altcoins have plummeted significantly, with SOL falling 10%, AVAX falling 11%, and MATIC falling 12%.
The Dow Jones Industrial Average (DJIA) fell 0.8%, while the S&P 500 and the tech-heavy Nasdaq composite fell 2.1% and 1.5%, respectively.
Gold, often seen as a safe haven against inflation, decreased in value by 0.6%, crude oil decreased by 0.32%, and natural gas increased by 1.0% in the energy markets. Prices for copper futures gained 0.9%.
Bitcoin, ether, and gold values are roughly 4:00 p.m., New York time. Bitcoin is represented by the CoinDesk Bitcoin Price Index (XBX); Ether is represented by the CoinDesk Ether Price Index (ETX), and the COMEX spot price represents gold.
Latest prices
Bitcoin (BTC): $21,257 −9.1%
Ether (ETH): $1,690 −9.8%
S&P 500 daily close: 4,228.48 −1.3%
Gold: $1,761 per troy ounce +0.3%
Ten-year Treasury yield daily close: 2.99% +0.1
(Bitcoin, ether and gold prices are taken at 4 pm New York time)
Markets into oversold territory
Bitcoin had a substantial decline overnight, responding negatively to Germany’s surprisingly weak inflation data.
At almost the same time as the release of Germany’s PPI data, BTC’s hourly chart indicates a 4% fall. The research increases market concerns that the U.S. Federal Reserve and other central banks would adopt forceful steps to combat inflation, exerting a negative effect on asset values.
The hourly chart of BTC below depicts the time of the German PPI announcement in conjunction with the price decline of BTC. Compared to BTC’s 20-hour moving average, the volume for the 06:00 UTC hour was much higher than usual. The drop also happened inside a price band with typically lower volumes. The Volume Profile Visible Range (VPVR) tool applied to Bitcoin’s hourly chart reveals a group of “low volume nodes” between $22,000 and $21,000.
The VPVR instrument evaluates activity levels at certain price levels and can identify areas of price convergence. Low volume nodes reflect areas of less activity and are frequently associated with more price volatility.
Following the price collapse, the Relative Strength Index (RSI) on the hourly chart for BTC plummeted to oversold levels. The Relative Strength Index (RSI) is a popular technical indicator that analyses price movement. Readings of 70 or above indicate an asset is overbought (i.e., overpriced), while readings of 30 or below indicate an asset is oversold (undervalued). The current RSI for BTC is 29.23.
Bitcoin/U.S. dollar hourly chart. Source: TradingView
Focus on $21,000 put options
The Market Wrap on August 16 featured BTC options open interest. Note the concentration of put options near $21,000, which has climbed to 3,300 BTC in light of today’s fall (previously below 2,000 BTC). A put option represents the choice, not the duty, to sell an asset at a specific price.
Should BTC prices fall below $21,000, traders owning $21,000 puts would be motivated to use their right to sell BTC, exerting more downward pressure on the cryptocurrency’s price.
BTC options open interest by strike price. Source: Coinglass
A tug of war at the $21,000
The VPVR instrument on BTC’s daily chart reveals a substantial level of price congruence near the $21,000 mark. Technical indicators and open interest in futures markets suggest that $21,000 is the point where bullish and pessimistic BTC investors will compete.
In addition to being a high volume node, $21,000 represents the control point, which is depicted by the red line in the graph below. The point of control inside the VPVR tool displays where the greatest degree of price agreement occurs and frequently corresponds to support and resistance levels.
Bitcoin/U.S. dollar daily chart. Source: TradingView