A Secondary Reaction
Bitcoin took a surprise tumble this past weekend. Down as much as 16% over the past three days the world’s leading cryptocurrency is now trading at levels not seen since early January. While scary, this move will likely not last long and here is the reason why.
Members of a defunct ponzi scheme called Plus Token is dumping tokens on the market. This news came to light thanks to a Twitter account labeled only Ergo. The perpetrators of this scheme sent nearly $220 million in tainted funds to a mixer over the weekend. A cryptocurrency mixer, also called a tumbler, is a service that scrambles and mixes coins and tokens in way that makes them less traceable and therefore safer for criminals to sell. The use of the tumbler suggests the group behind Plus Token is liquidating their funds and the rapid decline in BTC confirms that someone is doing just that.
Other top BTC pundits including TradingView analyst Jacob Canfied concur, BTC is falling because Plus Token’s supply is getting dumped on the market. The Plus Token scheme was busted last spring but there are still unknown operators at large. Someone from the group has been moving millions in ETH and BTC from wallet to wallet over the past few months and there is still quite a bit left for them to sell.
The Technical Damage Is Still Limited
While there has been some technical damage done it is limited. The bad news is that the 2020 uptrend is over, at least for now. The BTC/USD has corrected back to a key support that indicates a new trading range may have formed. This range has a bottom, potential bottom, at today’s low and a top near the 2020 high. In the near term I would expect to see prices continue to bob along support, assuming it holds, until the bulls can get their feet back under them. If price action doesn’t bounce back from the current levels it will negate the price reversal that happened during November and December 2019 and may lead to a much deeper decline.
Longer term, I am still the same old perpetual bull. The halvening is still coming up and I think that will underpin price action if not drive a new bull market. The halvening will come in about two months from this posting and the hash rate continues to rise which tells me the miners are looking for higher BTC prices.