An excessive confidence in a further rise in BTC and a jump in the number of speculative long positions led to a correctional movement that later affected the whole market. The number of long positions was actively growing, thus causing an unexpected decline of 9%. As a result, the asset broke the level of $60,000. The decrease took place amid a negative news flow. That is why the first cryptocurrency is likely to slide deeper.
The correction influenced the whole market, while bitcoin needed a local drop after a several-day rally. The speculative activity almost reached its peak, thus pointing to the upcoming local decline. Disappointing news from both the US and China became the main reason for a drop in the crypto market. As a result, traders closed a large number of positions worth more than $610 million in one day and more than $1.5 billion in the last 7 days.
Investors' behavior was seriously affected by Joe Biden's decision to significantly tighten regulations on cryptocurrency trading. The US President signed an infrastructure bill, according to which the digital coin market is subject to mandatory reporting to the Tax Service on the activities of its users. In fact, this action impacts the confidentiality of investors' transactions and tightens tax control over the activities of cryptocurrency platforms. In addition, the expected income from this type of taxes could exceed $28 billion.
At the same time, China is planning to impose stricter sanctions on crypto trading. According to the new rules, mining will be prosecuted both in private enterprises and residential homes of individuals. In addition, some politicians have been dismissed and expelled from the party for supporting mining. They will receive criminal charges for mining digital coins. Due to excessive overheating of the market and negative news, the total capitalization of the cryptocurrency market collapsed by 9% to $2.8 trillion.
During the last 24 hours, bitcoin lost 7.5% and dropped below $60,000. However, later, it managed to consolidate above the mentioned level. One big holder of digital coins benefited from the situation and purchased 207 BTC for an average price of $62,000. As a result, the trader entered the top-3 list of the largest cryptocurrency holders. Judging by the recent drop, BTC may show the fastest rally of the year. This is proved by investors' behavior. They are actively buying coins amid lower prices.
At 4 pm, bitcoin was trading around $60.5K, trying to consolidate above the support level of $60.2K. Amid the decline, the BTC price hit the level of $58.6K and then rebounded. As a result, the price closed above the open reading. Now, the coin is approaching the first resistance level near $62.1K. Thus, the price may enter its consolidation range.
Moving higher, the price may face resistance at the level of $64.4K. An upward breakout of the level will point to the end of the consolidation phase, as the price is likely to go on climbing. Technical indicators are also gradually recovering. Stochastic and the relative strength index (RSI) are rising to the bullish zone that is above 40. However, MACD continues sliding below zero, thus providing a bearish signal.
It is quite possible that BTC will continue its correctional movement. The key support level is located at $58.6K. It is a reverse point after a drop. A big number of long positions and a strong support level proves this. Notably, the price has tried to downwardly break the mentioned support level several times already. At the same time, the level of $53.6K is a perfect price to buy the asset. BTC is only getting ready for the main bullish rally. Against this background, market participants may push the price even lower to make investments that will bring more profit.