Bitcoin Drifts Lower as Cryptos Stabilize After Tuesday Plunge

(Bloomberg) -- Bitcoin struggled as the U.S. trading day began, extending its decline in the wake of Tuesday’s broad plunge across cryptocurrencies even as several alternative coins staged a modest recovery.

The most traded digital asset fell 2.2% to $8,395 as of 6:42 a.m. in New York, slowing down after a wild ride the previous day saw an intraday drop of 17% -- the biggest since January 2018, according to Bloomberg composite pricing. Bitcoin hadn’t traded below $9,000 since June.

The wider Bloomberg Galaxy Crypto Index slipped 1.1%, as rivals Ether and EOS eked out modest gains. EOS, whose 28% plunge was the worst yesterday, advanced 3.8%.

Traders cited multiple reasons for the decline -- from a lackluster introduction of one-day Bitcoin deliverable futures Monday to a general risk-off atmosphere in traditional assets. ICE’s Bakkt venture issued 113 one-day contracts Tuesday.

“When the actual Bakkt launch showed disappointing volumes on the first day, it opened the hatch and the bottom fell out of the market,” said Travis Kling, founder of Los Angeles-based crypto hedge fund Ikigai.

Vijay Ayyar, Singapore-based head of business development at crypto exchange Luno, sees a potential short-term bottom of about $7,500 for Bitcoin before year-end, an “expected consolidation” after the strong rally earlier this year.

“Price action is being driven by short-term technical analysis, as every low price that Bitcoin has bounced off of, and every high price that has been reached has proven to be resistance,” Jeff Dorman, chief investment officer at Arca, a Los Angeles-based asset manager that invests in cryptocurrencies, said by email. “Because crypto is still dominated by short-term focused traders, these telegraphed narratives often become self fulfilling prophecies.”

The move Tuesday also meant Bitcoin closed below its 100-day moving average for the first time since March. Through April, May and June, the coin went nearly parabolic with an upward run that took it as high as $13,852. It had been hovering around the $10,000 level in recent weeks.

Galaxy Digital noted in a trading update Tuesday that levered long speculators “were caught offsides” by the day’s sharp move.

“BTC/USD open interest on major levered exchanges hovered around $1 billion before the sell-off,” the Galaxy note said. “Roughly $500 million of those positions were liquidated in the selloff, with $250 million adding new positions.”

--With assistance from Todd White.

To contact the reporters on this story: Olga Kharif in Portland at okharif@bloomberg.net;Eric Lam in Hong Kong at elam87@bloomberg.net

To contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, ;Nick Turner at nturner7@bloomberg.net, Joanna Ossinger, Ravil Shirodkar

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