KEY POINTS

  • Short-term traders are looking to take profit while Bitcoin is at its peak price
  • Some whales are keeping their Bitcoins on exchanges to sell
  • The recent halt in upsurge could be just a rest stop

Bitcoin dropped to near $17,600 Wednesday as it suffered the worst sell-off so far at a time when the dominant cryptocurrency almost reached $20,000.

After a decline from $19,184 to $18,307 on Tuesday, Bitcoin continued its plunge as it dropped to as low as $17,635 on Coinbase before recovering back to $18,527. Although it ended the day with a green candle, it's still lower than the previous green on Dec. 6, which was at $19,389.

While it was not the worst sell-off in the history of Bitcoin, the benchmark cryptocurrency was just a few hundred bucks away from $20,000 on two occasions in the past 10 days. So Wednesday's drop to $17,600 put the price a bit out of reach of the perceived all-time high.

Analysts said this could be because of recent buyers who wanted to lock in their gains by selling near the top. Bitcoin was rarely above $19,000 so it was an opportunity for short-term traders to sell for profit near Bitcoin's top.

Lucas Huang, head of growth at Tokenlon, a decentralized exchange, said the mindset of retail traders could have triggered the sell-off. "An 80% increase in Bitcoin price over only two months might be a profit too tempting not to take," he told Coindesk.

According to the metric "Bitcoin Coin Days Destroyed," which tracks dormant Bitcoins that have moved suddenly,  there was also an increase in long-term holders selling their cryptocurrencies, news outlet Decrypt reported.

Cryptoquant CEO Ki Young Ju pointed to whales – holders of large quantities of Bitcoin – for the drop in price. Since a large number of Bitcoins are on exchanges, it makes it possible for them to cater to demand by selling, Coindesk reported.

The daily chart indicates Bitcoin is printing more lower-highs, suggesting that buyer interest is getting weaker. Key support was near $18,600 (now a resistance). On Wednesday, bulls managed to regain at least $18,500 but it remains to be seen whether it would be strong enough to resist another sell-off.

While the short-term appears to be bearish for Bitcoin, many analysts are still bullish in the long-term. According to Jehan Chu, co-founder of Kenetic Capital, the current upsurge halt will soon resume to around $30,000 by mid-2021. Chu says Bitcoin investors are already used to this kind of volatility.

"We can expect these moves to become less frequent as institutional funds continue surging into the market and the volatility declines further," Chu remarked.

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