Bitcoin looks like it may suffer a gruelling correction in the coming weeks, according to eToro analyst Simon Peters.
The entire cryptocurrency market experienced a notable pullback yesterday with Bitcoin falling to as low as $9,000 before finding a bounce.
The move to the downside was replicated in traditional markets, with the S&P500 suffering a 6.77% plunge.
“The recent cryptoasset pullback coincides with a similar retraction in global equity markets.” Peters said. “It appears the narrative in markets has somewhat changed from potential recovery and reopening of economies post-lockdown, to a potential second COVID-19 wave, especially after several US states have reported a spike in coronavirus cases since reopening their local economies.
“Optimism has dissipated and realism has set in, in both the cryptoasset market and global stock markets. If we begin to see widespread second spikes of COVID-19, then it would probably cause another sell off across all markets. If the price drops below the $8,500 level, investors should be worried.”
He goes on to say that while a short-term Bitcoin correction may be difficult, it will be the beginning of a new bottom formation that will act as a platform for a rally into the second half of the year.
He continued: “With bitcoin there is always the possibility for a further drop, but it’s my view that we are seeing a new bottom begin to form. Fundamentals remain positive for the asset, especially given the recent Fed meeting and indication of continued economic stimulus and consistently close to zero interest rates.”
At the time of writing Bitcoin is trading at $9,453 with notable levels of support at both $9,000 and $8,830. Breaking below those levels would indicate a change in market sentiment with potential downside targets emerging as low as $7,100 while there is also a chance of a bounce at $7,800.
For more news, guides and cryptocurrency analysis, click here.