2017 started with a dream Bitcoin Bull Run with the cryptocurrency prices surging towards the all-time high. Before bitcoin enthusiasts could cherish the currency peak, there was a sharp drop in the price taking the currency back to $900 levels. Most people were shocked and disheartened about the abrupt shift in market dynamics. Market players started scurrying for reasons and comforted themselves with the circulating rumors involving China’s Policies. While it is true that China has always been a major influencer on Bitcoin prices, it might not be the driving factor here. Let’s look into why Bitcoin prices were bound to fall at peak levels and what would be the trajectory from here:

It’s all technical:

Bitcoin market has always followed the standard rule of currency markets: market trades all the regions adequately before moving to higher levels. It is very important to keep this in mind as market has always come back to trade low volume regions before resuming the Bull Run. This was evident when market went from $700 to $800 level and crashed back to compensate the lack of volumes.

Similar to that swing, market went from $900 to above $1000 with scanty volumes. Hence the crash was expected and the market came back to trade the low volume regions.

The peaks are always sloppy:

The prices have been bullish for most part of last year and the market has been trending. The only way this could have been halted was the effects of strong, long term and negative fundamentals. This happened for a brief period in 2016 when China announced capital controls on Bitcoin which lowered the prices. Later the sentiment settled and the market became trending in bullish direction.

When the market approached the peak for the first time in three years, the apprehension surrounding the speculation became very intense. With low number of buy orders at the top, traders and programmed algorithms can be set into a sell mode with little panic. With unstable market dynamics, the rumor acted as a catalyst for the quick crash.

What’s next?

Following the pattern, the market has consolidated at 78% Fibonacci Retracement level. Algorithms are coded to have strict adherence to these levels. Infact quick acting algorithms would be reason for the crash of the market which ignited a sell off. These $900 levels would be a better entry position to set oneself up for long-term trades. If the all-time high breaks, the market is bound to go very high with good volumes and strong support.