Has Bitcoin been building support above $6,000?
Since declining sharply on Sunday, the digital currency has fluctuated largely between $6,600 and $6,900, according to the CoinDesk Bitcoin Price Index (BPI).
Over the last few hours, the cryptocurrency has moved slightly below that range, falling to as little as $6,455.92 by 19:15 UTC (3:15 p.m. EST), additional BPI figures show.
At the time of report, the digital currency had recovered slightly, trading at $6,555.70.
When asked whether Bitcoin was building support above $6,000, analysts seemed noncommittal.
“Looking at history we don’t really see any reason for major support between $6,600 and $6,000,” said David Johnson, CEO of cryptocurrency tasking platform Latium.
“Of course you have the psychological $6,000 level, but I don’t feel that will be enough to stop downward pressure,” he added.
Bitcoin’s ‘Liquidity Vacuum’
As Bitcoin trades within a relatively tight range, the cryptocurrency has been suffering lackluster trading activity.
Over the last week, 24-hour trading volume has repeatedly fallen short of $5 billion, CoinMarketCap figures show.
“Bitcoin is in a liquidity vacuum at the moment,” noted Mati Greenspan, senior market analyst for social trading platform eToro.
“This is what caused the exaggerated break below the $7100 support,” he added.
Because the Bitcoin markets are struggling with low trading volume, the digital currency is more vulnerable to significant price swings caused by large market participants or “whales” making sizable trades.
“With daily volumes below $5 billion the market could potentially be swayed by a very large player,” said Greenspan.
“However, any such player would be risking a lot as the CFTC is now investigating price manipulation in Bitcoin.”
Sentiment’s Key Role
Analysts emphasized that going forward, a change in sentiment could be the key to Bitcoin breaking out of its current trading range.
While traders are sitting on the sidelines, they should be on the lookout for such a change, emphasized Nate Flanders, CEO of Delaware-based Mandala Exchange.
Greenspan provided similar input, emphasizing that if sentiment becomes more positive, it won’t “take much effort to get back to the highs.”
This story originally appeared in Forbes, Image courtesy of Shutterstock.