On October 11th, the bitcoin (BTC) price dropped over 5% within 30 minutes, briefly falling below the $6,200 mark for the first time since mid-August. The sharp drop in BTC price has come at a time when the world’s equity markets have experienced one of their “worst sessions”, MarketWatch reported.
Many bitcoin supporters have said that the flagship cryptocurrency could become a haven during times of political and economic uncertainty - similar to how gold and other precious metals currently function as a store of value (SoV).
BTC May Not Replace Gold As SoV
As CryptoGlobe reported in mid-August, Lou Kerner, the co-founder of CryptoOracle.io, a venture capital firm that invests in various crypto and blockchain startups, had said that bitcoin was “functionally much better” as a SoV than gold.
Kerner had also noted that people would gradually begin to switch from gold to bitcoin as they would begin to realize the cryptocurrency’s potential of being a more superior instrument for storing value and as a long-term investment.
However, market analysts have recently been expressing concerns about bitcoin’s performance and questioning whether it could actually become a legitimate asset class.
Possible "Widespread Selloff" Ahead
The [cryptocurrency] selloff also appears to have stretched to more exotic instruments, with bitcoin [not] displaying the qualities one would expect of gold 2.0, as it has been touted as by some cryptocurrency enthusiasts, or simply escaping relatively unscathed as a new and relatively uncorrelated asset.
Erlam, who has also worked as dividends adminstrator at Pershing Nominees, thinks both the traditional and crypto market are heading toward a “widespread selloff.” He added that traders will be looking to dispose “anything perceived as a risky asset class.”
Although Erlam did not mention whether he thinks bitcoin would drop below the $6,000 support level, he did note that the cryptocurrency’s price has found a floor at this price “on numerous occasions this year.”
Exhibiting "Negative Divergence Pattern"
As CryptoGlobe reported today, technical indicators suggest the BTC price could continue to decline further and that its $6,000 support might be tested again. The world’s most dominant cryptocurrency is exhibiting a “negative divergence pattern” - which is tracked by a technical indicator referred to as the Directional Movement Index.
According to Bloomberg, the index’s ADX is used to gauge the strength of the trend, which appears to have hit a bottom, and is now moving up. This suggests that the downward trend may gain more momentum and then continue to drop BTC’s price further.