- The breakout beyond $12,000 showed challenging to support for Bitcoin
- Experts are anticipating a revisit to $9,700 because of the CME gap
- They also believe whales are selling at the $12,000 because they are either in advantage or at a break-even point
Bitcoin in the end ran away from the $12,000 area after an extreme sell-off Monday.
The benchmark cryptocurrency opened at $11,750 and moved downward to as low as $11,112 before completing at $11,3328, a 3.57% reduction from the previous day, and an 8% drop from the current yearly high of $12,298.
Experts credited the retreat to actual stability, selling pressure, and the CME gap.
The 12,000 level is a notable resistance because Bitcoin has rarely reached this territory. After 2018, this resistance has only been tested three times, Cointelegraph announced.
Based on the Ichimoku Cloud indicator, Bitcoin is currently below the baseline or the Kijun-sen, a bearish signal on the daily chart. The MACD indicator is about to diverge bullishly, and the Relative Strength Index (RSI) is currently at 50. The RSI was at 50 for the majority of July this year, before breaking out on July 27.
The 12,000 to $12,500 level is also where there seemed to be an immense selling pressure. Analysts say this could be whales who have reached a break-even point or are riding the selling pressure as they are already in profits if they have bought Bitcoin between March 12 and August 17. According to crypto analyst David Fuel, the current whale activity could spark another re-accumulation period.
Finally, the Bitcoin price could still fill the gap in the Chicago Mercantile Exchange or CME. This break is an unfinished space in the chart that appears whenever Bitcoin makes a sharp move while the CME is closed. CME is not a 24/7 exchange, unlike regular cryptocurrency exchanges like Binance. This is anticipated to be filled because of the notion that institutional investors and whales are trading on CME, and these people have adequate potential to move Bitcoin in the direction they intend.
The gap is seen to be at the $9,600 to $9,700 range from the chart above.
Was this Bitcoin drop caused by the recent surge in Mining Difficulty?
Bitcoin mining difficulty reaches a new all-time high, and it is expected to further to increase in the next adjustment. This increase in mining difficulty is related to the increase in hash rate.
According to an analyst, the current rainy season in China is the only reason why older mining machines continue to operate
Bitcoin mining difficulty has hit 17.56 trillion, a massive 3.6% increase that can lead some miners, particularly those with less powerful hardware, to capitulate.
Adjusted every two weeks, Bitcoin mining difficulty is an automatic mechanism to ensure blocks are mined in the Bitcoin network at a steady pace. If they are drilled quickly, the problem could go higher. If blocks are mined at a slower rate, the difficulty could decrease to put everyone at the same pace again.
The increase in difficulty is also related to the rise in the hash rate or the amount of computing power on the Bitcoin network. The hash rate has steadily increased this week. At 136 exahashes per second, the quality is now on par with the figure recorded during the Bitcoin halving and just before the March 2020 crash.
While the hash rate went down during the entire season, which news outlet Decrypt attributed to the recent flood in China that resulted in cheap hydroelectric power used to control the mining rigs, it was on track to reach another record high soon.
If the hash rate and mining difficulty continue to increase, more retail miners would have problem mining Bitcoins in the future, which will eventually lead to their capitulation.
“Old-gen machines will struggle to keep mining,” said Thomas Heller, chief operating officer at HASHR8, a Bitcoin mining firm. The analyst said the Antminer S9 from Bitmain remained a popular choice for miners because the rainy season was keeping electric bills lower in China. But once the season is over, the analyst said bills would go up, and by that time, the S9s would not be profitable anymore.
In an interview with AmbCrypto, Heller also said that the launch of newer models like the M30 and S19 would finally replace the S9.
“After the Hydro Season finishes this year, the mining revenue at the electricity cost of 0.35 RMB ($0.05) will no longer be able to offset the electricity costs if the Bitcoin price does not have a sharp increase,” he added.