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The bitcoin rally ended with a small crash after prices decisively broke below the important $270 handle. The breakdown happened around 15:00 CET (9 AM EST). During a short 5 minute window BTC/USD broke below $270 on OKCoin and $265 on BTC-E. You can see on sharp decline on the chart below.
While prices only dipped by $4-$5 dollars on the exchanges, the fall was much deeper in futures. For example, the September 25th futures contract crashed from $282 to a low of $269.51 dollars. Later in the session the fall extended to a new low of $259.13 dollars. We are currently quoted at $263.22, while the main exchange is at $259.51 dollars. This puts the premium over spot at only $2.71, a sharp contraction from yesterday’s $11 dollars.
We’ve repeatedly warned our readers that this premium is mainly due to traders price in more gains in the future. Yesterday we said: ”Futures traders are keeping the prospect of more gains alive, but this premium could quickly evaporate if prices on the main exchange dip below $270 dollars per coin.”
When the uptrend ”officially” ended, the premium got repriced to more reasonable levels. The two other contracts are trading very close to spot, with the nearer August 14th quoting $259.13 while the slightly far-out August 21th is at $259.30 dollars.
What’s next for bitcoin? The following days should determine whether this trend break turns into a full blown sell-off. Notable support levels include weak support at $259 dollars (OKCoin) and $256.71 (BTC-E). This was a former swing high reached on June 17th. But much more important support lies right below at the round $250 figure. This
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