Bitcoin Retreats, No Place for The Faint-Hearted

After a tough week on the crypto markets, now is not the time for emotions.

by Kyzmoff
14 May • 3 min
In Analysis
Bitcoin (BTC) slumped more than 15% last week with a Thursday and Friday raid against South Korean Upbit, one of the world's largest cryptocurrency exchanges, quoted as one of the main reasons behind the losses. Even though the investigation over allegatons of illegal activities against the largest exchange in South Korea took its toll on the market, bearish signals were already there before Korean authorities' move.
In a single day on May 11, the crypto exchanges erased USD 75 billion of their market cap, or some 20%. Upbit's capitalization was around USD 1.6 billion on Friday, according to Coins.Online data. For those familiar with Bitcoin and digital coins, they are not exactly the stable type of assets. But losing 20% in a single day is harsh even by cryptocurrency standards.

Where is the Bitcoin headed? 
Looking at the chart, Bitcoin is approaching a vital level around the 50-day moving average at USD 8250. At the time of writing, BTC is trading at USD 8400 which is around 2% above the 50-day average line. This indicator line is going to play an important role in determining where the cryptocurrency will go next. If it sets as support Bitcoin's price could bounce back to test again the 200-day moving average around USD 10 000, if however, the 50-day average fails to hold the price we could be up for a journey to the lower digits. 
When making decisions about the financial markets experts and analysts often compare their positions with those of the fund managers. As the Bitcoin Futures chart indicates almost immediately after the launch of the futures contracts in December 2017, BTC was at an all-time high and has been moving south ever since. But all that makes perfect sense when you analyze the outstanding positions on the market. Clearly visible on the chart below is that large speculators are holding short positions while retail speculators are long ever since the very launch of the Bitcoin Futures contract. It is also worth pointing out that leveraged fund managers, the investors who are the most frequently engaged in trades on the markets, are also short on Bitcoin since January 20 this year, which coincidentally or not, is when most of the cryptocurrencies met their respective tops. 
Bitcoin is approaching an important level as big money managers are continuing to short the market. With that negative outlook in mind, it would be better to remain cautious and not let emotions cloud your judgment.