Bitcoin price briefly dipped below $30,000, before immediately bouncing back. This threshold is a particularly important value.
What’s going on with bitcoin? The course of the most famous cryptocurrency is going through a difficult time. Bitcoin has lost almost 50% of its value in 6 months, dropping from $66,000 in October 2021, its all-time high, to just 30,000 in recent days. The most pessimistic envisaged an endless fall.
But during the night, an event that many observers were waiting for happened: the price of bitcoin fell below the critical level of 30,000 dollars. The value, however, immediately bounced above. This drop and this sudden rebound are not insignificant, and perfectly illustrate the fact that the famous “ resistance threshold ” still exists.
What is bitcoin’s resistance threshold?
This notion of resistance threshold is very well known in the world of crypto-currencies but also in the stock market world. The term designates a minimum amount, beyond which analysts and experts believe that the price will not fall. There is an upper resistance threshold and a lower threshold.
The thresholds are generally calculated according to many technical elements and the opinion of several experts. But for bitcoin, the low resistance level is also very symbolic: it is the old high resistance level of bitcoin. Indeed, in 2017, bitcoin broke a previous record and sold, for the first time, at $30,000, before immediately falling again.
For a long time, the “30k” was the high threshold for crypto. It was only when this record was broken, in November 2020 when bitcoin sold at $62,000, that the low resistance level changed. It then settled at $30,000, making it a very symbolic milestone.
Numerama already told you about this resistance threshold last year, when bitcoin, like now, has been experiencing a sharp drop in price for a few months. And if some feared that the resistance threshold would not work, and that the price of bitcoin would go even lower, that did not happen: in July 2021, bitcoin very briefly rose to $29,807, before immediately bounce back to $32,000.
This is the scenario that has just repeated itself: on the night of May 9-10, 2022, bitcoin sold for $29,961, before going straight back up. It was trading at $30,700 just minutes later.
Why does the value go back up immediately?
Threshold resistance works through several mechanisms. But the most important thing remains the mercantile logic: when prices are low, everyone wants to buy. This is the same operation as the stock market: you have to sell when prices are at their highest, and buy when they are at their lowest.
Since the resistance level is estimated at around $30,000, as soon as bitcoin approaches this value, many investors stand ready to buy – this is what is called in the jargon “ buying the dip or “buy low”. So, as soon as bitcoin goes to $29,999, a lot of transactions take place. The stronger the interest, the faster the prices go up: this is why only a few minutes later, the price was again on the rise.
El Salvador is the perfect example: the country, which is the only one in the world with the Central African Republic to have made bitcoin a legal currency, is a major buyer of crypto-currencies. And on the evening of May 9, El Salvador also ” bought the dip » : the government took advantage of the price drop to buy an additional 500 bitcoinsor $16 million.