Bitcoin showed violent moves last night, first accelerating its rise and then plunging sharply.
After approaching the $13,000 mark yesterday morning, BTC/USD finally broke through in the evening and continued upward to reach a high of $13,764 — a level not seen in over a year.
However, immediately after that new peak, Bitcoin fell dramatically, plunging to a low of $11,832 within minutes — a drop of nearly $2,000.
What caused the sudden Bitcoin plunge?
The trigger for the crash appears to have been concerns about a potential hack on cryptocurrency exchanges.
Coinbase experienced a brief outage Wednesday afternoon, making its website and API temporarily unavailable.
According to Coinbase’s status page, the platform reported major outages affecting its website, mobile apps and API, although its internal systems seemed to remain operational during the episode.
At 5:17 p.m. ET the status page stated: “A fix has been implemented and we are monitoring the results.”
Robinhood’s trading app also reported issues with its crypto service, according to its status reports.
The platform became inaccessible on mobile and desktop browsers around 8:45 p.m. local time.
These outages sparked significant fears of possible hacks. Even though it later emerged that there was no breach, the damage to Bitcoin’s market sentiment was already done and the asset failed to fully recover.
Bitcoin struggles to recover from this mini-crash
After hitting the $11,832 low, Bitcoin bounced back above $12,000 and even briefly re-tested $13,000. Yet the cryptocurrency now risks falling back below $12,000.
If that happens, short-term outlooks would shift toward a correction down to the $10,000 area.
Dropping below that major psychological level could prompt a broader bearish reversal of the longer-term chart trend.
Three factors still support Bitcoin’s upside
Despite the recent turmoil, probabilities still seem to favor an upward path. Several factors continue to argue in favor of a return to Bitcoin’s historic highs around $20,000, and possibly beyond:
- Libra, Facebook’s cryptocurrency, is generating a lot of attention, and its planned launch next year is expected by some experts to encourage wider mass adoption of cryptocurrencies. Facebook’s more than two billion users will be exposed to crypto features, which could make it easier for the general public to understand and adopt other cryptocurrencies—Bitcoin first among them as the largest by market capitalization.
- Retail investor participation still has room to grow. Several indicators, such as Google search volume for Bitcoin, suggest that public enthusiasm is not as intense as it was during the 2017 rally that drove BTC to its previous all-time highs. That implies a considerable potential upside from increased retail participation. With Bitcoin recently crossing $10,000, mainstream media coverage is likely to intensify, which may attract more retail investors and further support price appreciation.
- A technical supply-side factor also supports higher prices in the coming months: the Bitcoin “halving.” Occurring roughly every four years, the halving will cut miner rewards in half around May 2020. Because miners are paid in newly minted bitcoins, halving reduces the rate at which new coins enter circulation. Reduced supply relative to demand typically increases scarcity, which often exerts upward pressure on prices.
Conclusion
Yesterday’s sharp drop appears to be a temporary setback, while multiple factors continue to favor a bullish outlook for Bitcoin.
However, that bullish case would weaken if BTC/USD falls decisively below $12,000 and would be even less likely if it breaks under $10,000.
If those support levels hold, the next major psychological hurdle on the way to the $20,000 all-time high would be the $15,000 level.