In what has been a tough couple of weeks for the bulls, the Bitcoin price did the expected and finally dropped below support at $7,000 yesterday, a move that has been on the cards ever since Bitcoin broke through support at $7,250.
At 12:00 UTC on 16th December, the Bitcoin price was trading at $7,122, and eight hours later, it dropped by 3.5% to trade at $6,879 at 20:00 UTC. At the time of writing, BTC is trading at $6,887.
The daily chart above shows that the price is trading well below the 50 SMA and 20 SMA curves, while the MACD (Moving Average Convergence Divergence) has been displaying a strong bearish bias for some time.
The hourly chart shows the Bitcoin price entering the 20-day Bollinger Band zone, while the RSI has been dangling precariously near the oversold zone for quite a while. For the bulls to have any hope, $6,740 is the level to defend.
In a report released by Chainalysis, the blockchain tracking firm opined that this sudden drop in the Bitcoin price may be a result of the Ponzi scam pulled by PlusToken – an online wallet for Chinese-speaking audiences.
They sold their own token in exchange for BTC, ETH, and other cryptos, offering monthly returns ranging from 9% to 18%. Chainalysis’ investigation found that 180,000 in BTC and around $2 billion in cryptocurrencies were transferred to PlusToken from victims’ wallets.
They hid this movement of funds by transferring their gains to OTC broker wallets on Huobi, the Singapore-based cryptocurrency exchange. Chainalysis found that around $185 million of this stolen BTC was cashed out using OTC brokers which may have resulted in several Bitcoin price drops since the $13,924 high in June.
Chainalysis admits that while this is a plausible theory, there’s a possibility it’s just correlation rather than causation.