Bitcoin (BTC/USD) made a dramatic reversal 6 hours ago after plunging as low as $332.50 on BTC-e, its lowest level since November 8th. After selling accelerated, it shot back up by 7.5% to as high as $357. It is currently trading at $348.
The pattern may be the short-term critical point of reversal many traders have been looking for. If BTC is able to climb out of its well under $360–not necessarily right away–it may be the beginnings of a larger mid-term recovery back into the upper $300s.
On the other hand, one cannot ignore the implications of the initial drop and the general bearish behavior observed over the past few days and beyond. BTC has shown weakening behavior relative to its 50-day moving average (MA), itself weakening as BTC’s lacklustre performance over the past several weeks has finally caught up. At $359, the MA is at its lowest in over a year. Hitting its new one-month low, the BTC price came within 16% of its 2014 bottom.
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Thus, BTC’s next direction is highly uncertain at this point, although it is a certainty that it will not remain at its current level, which is highly unstable.
The drop and reversal were characterized by more spotty volume behavior. Volume remained at about average for most of the drop, fell to below 200 BTC/hour near its climax, and then shot up to 500-1000 BTC/hour at various points during the reversal.
Prices on BTC-e are still $8 (2.3%) off from those on its peers, perhaps a result of lingering residual instability.