As Bitcoin (BTC) continues to trade firmly rooted in a bear market, the crypto market index may be on the verge of either a breakout or a catastrophic rejection.
The illiquidity of cryptocurrency markets often demonstrates a tendency to make investors believe the price is going one way, before moving it in the other direction.
There was a clear example of this over the weekend, as BTC broke above the US$4,050 level of resistance before falling 12%, crushing levels of support on its way.
This dipsy-doodle was another example of who is actually in control during a bear market – the bears.
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The recent short-lived bullish outpour which traders had long anticipated and more significantly expected to stay long-term was swiftly invaded by the bears a few days ago. Since then, the cryptocurrency market has lost well over US$7 billion in this very short period of time. However, the current state of the market reflects that the bears are loosening its grip on the majority of the cryptocurrencies.
Now market watchers are focused on whether Bitcoin can hold above US$3,800.
Ethereum (ETH) is currently trading at US$137 on Einstein Exchange, while BTC is priced at US$3,948.
Trading volume across the entire crypto market is still relatively strong at US$38 billion, but the market cap has seen US$12 billion evaporate since Sunday, shrinking to US$129 billion.
Bitcoin remains higher than where it was between February 8th through the 17th, when it spent days hovering around the US$3,600 mark. However, a retrace to sub US$3,500 levels would confirm the bear market is very much intact.
Sunday's correction will also add further fuel to the negative opinions of the crypto sceptics.
Yesterday, in an appearance on CNBC, renowned investor Warren Buffett and chief executive of Berkshire Hathaway, repeated his firm conviction, "explained to me by people a lot smarter than I am" as he put it, that Bitcoin is worthless.
"Bitcoin has no unique value at all. It doesn't produce anything. You can stare at it all day and no little bitcoins come out. It's a delusion basically."
Buffett added that "it attracts charlatans". He conceded that the underlying blockchain technology was "important" but said its success was not dependent on cryptocurrencies.