KEY POINTS

  • With Bitcoin in unchartered territory, traders took profits
  • Similar wild price swings happened during the bull run of 2017
  • Analysts say volatility will stay with Bitcoin as it continues going up

Bitcoin's price retreated immediately after hitting a new all-time high Tuesday. Analysts are still expecting a price upside, but warn of more volatility in the coming days.

Bitcoin opened Tuesday at $19,713, went as high as $19,915 before crashing to $18,872 on Coinbase. The price actually hit as low as $18,108 in a move that could have reversed all the gains from the previous day. 

The simple explanation for this price behavior is that traders took the opportunity to cash out their profits, said Charles Bovaird, an analyst at Quantum Economics. "After rising to an all-time high, traders took profits, causing Bitcoin to retreat," he told news outlet Decrypt.

Eric Wall, chief investment officer at Arcane Assets, echoed Bovaird's views. At the current price point, Bitcoin is technically near the unchartered territory. Traders were not sure what will happen next so they cash out, he said. 

Bitcoin made a similar wild swing in the last seven days. After hitting $19,000 on Nov. 24, it went down to $17,135 two days later. This also happened when it hit $15,657 on Nov. 5 as it slid down to $14,777 two days later. 

Similar things happened in the bull run of 2017. On Dec. 7 that year, Bitcoin rose from $14,090 and went as high as $19,653 before settling at $17,390, an extremely volatile price behavior that happened in a single day. The next day,  it went from $17,390 to as low as $13,778.

The only difference was that the daily relative strength index at that time was in overbought territory, while on Tuesday RSI was at 70, which is just below that level.

Analysts already expect extreme volatility for this month. The Bitcoin price needs to correct so that a sustainable rally can begin, Cointelegraph reported.

Bovaird says volatility will stay as Bitcoin continues going up. "If you are asking whether Bitcoin will suffer retracements as it rises in price, the answer is yes," he told Decrypt, noting that sharp price increases would motivate traders and investors to sell, leading to pullbacks.

Bitcoin has surged more than 170 percent so far this year and is homing in on $20,000 for the first time Bitcoin has surged more than 170 percent so far this year and is homing in on $20,000 for the first time Photo: AFP / Ozan KOSE