Bitcoin (BTC/USD) may be down, but it’s not out. Running into a wall of resistance in the low $230s, it appeared destined to continue following declining global markets.
Today, Bitcoin hit a peak of $242 on Bitstamp, its highest since August 18, when it plummeted by over 13% to $220. It subsequently slipped below $200 before climbing back toward $230. Forming a tight band, Bitcoin underwent its most stable 7-day period since May.
Interestingly, the recent wild price swings have correlated well with those in the global equity and commodity markets. Bitcoin hit its low near the climax of this volatility, which included the Dow Jones Industrial Average briefly falling by over 1,000 points, the Shanghai Composite Index losing 25% in just over a week and crude oil hitting 6 1/2-year lows. Traditionally, crypto markets have rarely correlated with their mainstream counterparts.
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Investors were possibly shedding riskier assets in all classes, in addition to being forced to liquidate under-margined positions.
In addition, the drop came amidst unsettling controversy regarding Bitcoin’s block size, which has spawned the creation of a potential fork in the blockchain and the rise of alternative proposals. The controversy has since cooled off, and perhaps weighs less on the minds of traders, although the core issues remain. While both sides have withdrawn from the battle lines on online forums, they have been increasingly embedding their beliefs into code and vying for support among miners and nodes.
Litecoin, which has been under-performing relative to bitcoin, broke back above $3 for the first time in 10 days. The LTC/BTC rate has thus recovered, at one point hitting 0.013. It currently sits near 0.0125.