(Kitco News) - It was a mixed day as far as price action goes across the cryptocurrency market on Wednesday as traders continued to digest the previous day's pullback following a hotter-than-expected inflation report which sent global financial markets tumbling.
Bitcoin (BTC) bulls defended the psychologically significant support at $20,000 throughout early trading but were overwhelmed by a bearish onslaught in the afternoon session, which resulted in BTC falling to a daily low of $19,629.
BTC/USD 4-hour chart. Source: TradingView
This spike in volatility to the downside was highlighted as a possibility by senior Kitco technical analyst Jim Wyckoff, who noted that “Price action is now sideways and choppy as the bulls and bears are on a level near-term technical playing field” is his morning Bitcoin update.
Moving forward, Wyckoff warned that “A drop in prices below chart support at the September low would give the bears fresh power to suggest a new leg down in prices,” while “A move in prices above chart resistance at this week’s high would recharge the bulls, to suggest further gains.”
Despite the sudden pullback in the price of BTC, the underlying fundamentals of the network continue to improve. On Tuesday, the Bitcoin mining difficulty climbed 3.45% to hit a new record high of 32.05 T, according to data from BTC.com.
The increase in difficulty follows the new record high hashrate of 264.8 Ehash/s, which the network recorded on Sept. 4.
Prepare for The Merge
Wednesday’s pullback in BTC put a damper on the excitement for the Ethereum (ETH) Merge, which Google’s countdown clock predicts will take place around 1:40 AM EST at the time of writing.
The Merge and its effect on the wider market have been a hot topic of discussion in recent months, with many warning that it would turn into a “buy the rumor, sell the news” type of event while others feel it will help kick off a bull market rally.
So far, it appears as though the former is likely to be true as the market is showing few signs that a rally higher is imminent.
This view was supported by comments from Edward Moya, senior market analyst at OANDA, who said that while “Ethereum’s Merge should be a pivotal moment for the cryptoverse, its current weakness is more likely reflecting investor expectations that we will see a classic ‘sell the event’ reaction once the Merge is done.”
Moya also pointed to the possibility that the current weakness may be impacted by profit-taking from hedge funds that had been playing the Merge narrative in recent months.
As for how Ether price will do versus Bitcoin moving forward, Moya suggested that “Ethereum will likely continue to chip away at Bitcoin’s lead as the top crypto, but chances of a flippening will have to wait a couple more years.”
Altcoins slide lower
It was largely a red day in the altcoin market as Bitcoin’s afternoon plunge below $20,000 squashed any momentum that did exist. At the time of writing, Ether is trading down 0.28% on the 24-hour chart and trading at a price of $1,586.
Daily cryptocurrency market performance. Source: Coin360
The biggest gainers out of the top 200 coins, according to data from CoinMarketCap are Ravencoin (RVN), which climbed 19.17% to hit a high of $0.0737, followed by an 18.48% increase for Conflux (CFX) and a 17.65% increase for Celsius (CEL).
The overall cryptocurrency market cap now stands at $981 billion, and Bitcoin’s dominance rate is 38.7%.
