Skittish Investors Wipe Out All 2021 Gains, Sending Bitcoin Crashing to a New Low & Ether Back at $1,700
The cryptocurrency market is experiencing another brutal day. The price of Bitcoin went down as low as $28,830 on Coinbase, as of writing, lower than the May 19 low of $30k on the exchange, a level last seen in early January. On other cryptocurrency exchanges, prices went even lower. Today’s sell-off has put in a new low for 2021 and wiped all the gains made by bitcoin this year. “There’s just a lot of fear, and when there’s fear, people sell risky assets. I do think that Bitcoin’s still perceived as a risk-on asset,” Meltem Demirors of CoinShares, said in an interview on Bloomberg. “Generally, investors are skittish.”
Ether’s price went down to $1,700 on Coinbase, below the May low of $1,725, last seen in March this year only. The total cryptocurrency market cap has stumbled to $1.2 trillion, last seen in early February. After yesterday’s $1 billion liquidations, another 238,232 traders were liquidated for almost $1 billion and growing in the past 24 hours. These numbers, however, are not correct because Binance API only publishes 1 liquidation per second. According to Antoni Trenchev, co-founder of crypto lender Nexo in London, breaking $30k means “we should revisit $25,000 and even $20,000 before the next leg up.” Pankaj Balani, chief executive officer of digital asset derivatives exchange Delta Exchange, is of a similar opinion who told Bloomberg that a conclusive break below $30,000 would mean a “massive hit” to sentiment and possibly “heavy selling activity” across the crypto market. However, he expects bitcoin to rebound and challenge $40,000 in the coming weeks. https://twitter.com/RaoulGMI/status/1407100487690752000 “Negative trading conditions in the market are coming from an overly long position built up in the strong first-quarter runup that has not cleared itself out yet,” said Adam Reynolds, CEO at Saxo Capital Markets. With this latest sell-off, Bitcoin’s correlation with the S&P 500 had broken and now fallen to zero after reaching an all-time high when coronavirus struck. Stocks are progressing towards their all-time highs after recovering sharply from their last Friday lows following the Federal Reserve’s shift in policy. JPMorgan strategists said in a note,
“Last week’s FOMC meeting was a hawkish surprise but does not change our market outlook. The reflation trade experienced a sharp, technically driven pullback, but we expect the trade to resume and see this move as an opportunity to add exposure to cyclical equities and commodities.”
https://twitter.com/MatiGreenspan/status/1407302990315282433 For Bitcoin, it’s more than just the Fed and rising dollar at play here; the industry-specific factors, especially China cracking down on the cryptocurrency market, are impacting the prices. As we reported, China’s latest measures came from the nation’s central bank, which summoned officials from banks and payment institutions like AliPay to reiterate a ban on crypto services. Although this is nothing different from the past and has already been in effect, the fact that it comes straight from the top makes it hit harder. Seth Melamed of Tokyo crypto exchange Liquid said,
“Some of the miners in China may be more willing to sell their bitcoin now versus when they are able to run their mining operations, because they have to raise cash.”
https://twitter.com/AltcoinPsycho/status/1407069745564684288 At the Qatar Economic Forum on Tuesday, founder and chief executive officer of Galaxy Digital, Michael Novogratz, argued for Bitcoin as a dependable store of value. He said,
“If you’re going to be long gold, Bitcoin is a better version because it’s got the same macro tailwinds, but it is also very early in the adoption curve.”
https://twitter.com/mcuban/status/1407044302908362759 Billionaire investor Mark Cuban also argued along the same lines as he said while not a “hedge,” bitcoin is similar to gold because both the assets are driven “exclusively by supply and demand.” It’s just that “BTC does a better job with both,” while gold “is useless, pretty much across the board, but particularly as a hedge,” he added.
Bitcoin Crashes Below $30K For The First Time Since January 2021
Things in the cryptocurrency market are looking increasingly bad as the price for bitcoin just crashed below $30,000.
- Bitcoin’s price is currently trading below $30,000.
- This hasn’t happened in months as the last time we saw these levels was in January 2021.
- Other cryptocurrencies are also following suit with most of the altcoins charting double-digit declines on the weekly.
- This has also led to almost $800 million worth of liquidated positions across the major exchanges over the past 24 hours.
- The largest single liquidation order happened on Bybit. It was a Bitcoin position with a face value of $5.4 million.
- Not surprisingly, the majority of liquidations came from long positions. In the past hour alone, around 94% of the longs were wiped off.
Bitcoin Crash Slows Institutional Demand
More than a week after the bitcoin price crash of May 19, institutional investors have demonstrated a weak appetite when it comes to buying the dip, according to analysts at JPMorgan.
“Bitcoin funds continue to see outflows and gold exchange-traded funds continue to see inflows, suggesting that the shift away from bitcoin and back into traditional gold by institutional investors is still underway,” according to the report by JPMorgan analyst Nikolaos Panigirtzoglou.
May marked a 35% drop in price for bitcoin, making it one of the worst months to date for the cryptocurrency.
“There is little doubt that the boom and bust dynamics of the past weeks represent a setback to the institutional adoption of crypto markets and in particular of bitcoin and Ethereum,” according to the report.
The analyst sees medium-term fair value for bitcoin in the $24,000 to $36,000 range.
“We had argued previously that the failure of bitcoin to break above the $60K threshold would see momentum signals turn more bearish and induce further position unwinds, and that this has likely been a significant factor in the correction last week” in pushing commodity trading advisors and other momentum-based investors to cut positions, the bank said.
Read more: Bitcoin’s Long-Term Put Options See Sustained Demand as Price Consolidates
On the Chicago Mercantile Exchange, there’s a similar picture of little appetite to buy the dip, according to the analyst.
At press time, bitcoin was trading at $36,221, representing a nearly 1.5% drop over the last 24 hours. The cryptocurrency is up by 24% so far in 2021.
The cryptocurrency could continue to fall in the short-term, the analysts wrote.
“While there are tentative signs of stabilization in bitcoin and Ethereum prices following the correction in recent weeks, the positioning backdrop is not yet at levels that could be characterized as ‘oversold,’ leaving them vulnerable to further position unwinds,” according to the report.
Read more: Bitcoin, Ether Etch Largest Daily Gains in a Week
4 Signals That the Bitcoin Crash Might Soon Reach a Local Bottom
A bullish case isn’t on many people’s minds – but signs are cropping up that Bitcoin may indeed be headed for a trend reversal. Here are some signs explaining why BTC might be overdue for a renewed uptick.
Bitcoin reached its all-time high of almost $65K on April 14, 2021, a little over a month ago. However, over the past 10 days the price violently broke down from the $50K mark and even reached $30K last Wednesday.
The bearish sentiment affected the whole crypto market, as altcoins suffered even more: ETH, which saw its all-time high of $4400 just 11 days ago, dropped earlier today below $1800, before a slight correction as of writing these lines.
Where is the bottom for this ongoing crypto bloodbath? No one knows, but it might be worth keeping an eye on the following optimistic signals.
Crypto Fear & Greed Index: Remember April 2020?
The crypto fear & greed index is now at levels not seen since April 2020, which is about the time when the last crypto market crash occurred, taking BTC down below $4,000, losing over 50% in two days at the peak of the pandemic “Black Thursday.”
In hindsight, it was an amazing time to buy in, but it wasn’t necessarily obvious back then. These days, Bitcoin has fallen over 50% from its ~$65,000 high down to $30,000 on Wednesday – is the index right once again, and is this crash a blessing in disguise for people with stablecoins on the sidelines?
here are some times in the last 2 years fear and greed was sub 15.
make of it what you will. pic.twitter.com/TlLe7B7Q5C
— Bluntz (@SmartContracter) May 23, 2021
S2F Model: Lower Band At $30K
Similarly, the stock to flow (S2F) model indicates that BTC is due for an upwards rebound at the $30,000 mark given its stage in the cycle. The S2F model treats Bitcoin as a commodity (given that it has a fixed supply and limited issuance, similar to gold) and thus factors in circulating supply and production speed in order to determine scarcity and therefore price.
IN BITCOIN’S SHORT HISTORY, the S2F model and 4-year cycle have been proven to be reliable. As been stated by PlanB, the creator of the mode: “The continuation of this crash into the next few weeks (effectively the end of the bull cycle) would invalidate the S2F model and 4-year cycle model,” which have so far been sound – many analysts predict that it’s not yet time for things to turn around for the worse.
S2F currently plots the lower band at $30K, which is this week’s current low.
On-Exchange Stablecoins At ATH, Waiting Aside?
The amount of stablecoins on exchanges is at a yearly ATH – Lex Moskovski opines that there are ‘a lot of bullets waiting to be deployed from the sidelines.’
Of course, this could merely be a function of a large number of new entrants into the cryptocurrency ecosystem, but it most likely means big players are gearing up to bring in large buys.
In addition, John Bollinger, the creator of the Bollinger Bands indicator, believes that BTC might be nearing a local double bottom.
All of these indicators come together and paint a better picture of Bitcoin’s immediate short-term potential than the market is making it out to seem. After the past few days’ waves of incessant bearish moves, it may be time for BTC to take a breather, as RSI indicates that we are heavily oversold.
Vaporware Altcoins Bleeding Out – BTC Dominance Rising
It’s clear that altcoins have more to worry about – Bitcoin dominance has hit a local bottom at ~40% and has been steadily trending upwards (currently sitting at 47%). It’ll most likely recover even more as the market sheds off the excess weight that had been added on by vaporware coins fuelled by the speculative altcoin mania bubble.
Those dogecoin copycats can be easily referred to as “dumb money” and “weak hands.” Once those hands are gone – the smarter money will return to the large-caps cryptocurrencies and, most likely, to the king of them, which is Bitcoin.
Crypto Stocks Nosedive as Bitcoin Crashes
Bitcoin critics have spent a lot of energy arguing that the cryptocurrency isn’t a hedge against traditional markets—it waxes and wanes along with them. But several companies are now so exposed to Bitcoin that a crash noticeably impacts financial markets.
The world’s favorite cryptocurrency fell from an all-time high of $63,500 in the middle of last month to a low of $33,888 this Wednesday. Today, Bitcoin trades for $34,991, about 9% less than yesterday. As Bitcoin crashed, so did shares in crypto-exposed tech companies.
Stocks in electric car company Tesla sank to a price of $580 on Friday—an overnight dip of about 6%. Tesla, run by Elon Musk, exchanged $1.5 billion for Bitcoin in January.
The share price of cloud computing firm MicroStrategy tumbled 22% to $450. MicroStrategy, run by Bitcoin ultra-bull Michael Saylor, owns a crypto treasury of around $111,000 Bitcoin (now worth about $3.8 billion) and pays its board of directors in Bitcoin.
So why the price keeps going down then? #
— Radoslav Dimitrov (@RTDimitrov) May 19, 2021
Shares of popular crypto exchange Coinbase, which listed on the Nasdaq last month, dipped by 9% on Friday. Coinbase stock is worth $242—43% less than its brief all-time high of $430 on April 28.
Crypto-friendly payments company Square closed 5% lower on Friday to a price of $200. The company, run by Twitter CEO Jack Dorsey, has spent $220 million on Bitcoin so far, and has avidly defended Bitcoin against criticism of the environmental impact of Bitcoin mining operations.
It’s not just crypto and crypto-related companies that have been at the mercy of Bitcoin’s pullback. As reported by the Financial Times, analysts at Dutch bank Rabobank found Bitcoin’s crash has hurt futures prices on the S&P 500, as well as the price of oil.
Analysts Richard McGuire and Lyn Graham-Taylor said in a newsletter on Thursday: “The catalyst for these moves appears to have been a sudden rout in bitcoin.”
“It seems hard to conceive of how there can be a direct link between bitcoin’s gyrations and movements on the part of the global financial market,” said the pair. But “here we are. Even as august an organ as the Rabo Rates Daily has finally been forced to put cryptocurrencies front and centre.”
The cryptocurrency market currently has a market capitalization of about $1.46 trillion. At a market cap of about $655 billion, Bitcoin, makes up for about 45% of that—and exerts a huge influence over the rest of the market.
Bitcoin has not had a good week. On Tuesday, three Chinese payments firms issued a joint statement backing a crypto ban that the country’s central bank had recommended in 2017. Overnight, Bitcoin sank from a price of $45,472 to a low the next day of $33,888.
The bad news didn’t stop there. On Friday, Bitcoin crashed a further 12% when China’s financial committee announced that it will closely monitor Bitcoin mining operations.
How far Bitcoin has come in its short existence. The coin, created in 2008 as an escape from the traditional financial system, which still widely considers it a scourge, is now indissoluble from regular markets.
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.
Reliving The FUD That Led To This Week’s Bitcoin Crash
It is the worst of times. It is the best of times. It is the age of fear, uncertainty, and doubt. Nevertheless, Bitcoin’s fundamentals remain intact. The project’s value is still there, despite the disastrous drop in price. It was all going so well. How did we get here? Actually, there are a lot of valid reasons. Let’s review all of the causes that lead to this FUD.
As you know, everything started through Elon Musk’s fingertips…
Tesla’s “Environmental Concerns”
When Bitcoin was on its way up, Elon’s company gave it the push it needed. Tesla announced ownership of $1.5B worth of Bitcoin that, apparently, remain on its balance sheet. The crypto community celebrated the move, profits followed. The coin’s legitimization seemed to take a step forward. And then…
Inexplicably, Tesla announced they were discontinuing accepting BTC as a form payment. Despite wild speculation, no one knows what happened. In his tweeted announcement, Elon cited “rapidly increasing use of fossil fuels for Bitcoin mining” as the reason. Few people inside the crypto community believed it. Everyone outside of it did. And even though Tesla clarifies they didn’t sell any of their Bitcoin, the FUD set in. And retail investors started selling.
If you want to learn about Elon’s real views on the matter and about everything the crypto mining industry is doing regarding green energy, head over to Bitcoinist, our sister site.
Related Reading | Bitcoin TA: Here’s What Could Trigger A Bullish Reversal Above $40K
China’s Tightening Up Its Bitcoin Policies
This generated lots of FUD. The People’s Bank of China seemed to announce clear and unfavorable rules regarding cryptocurrencies. Yahoo Finance reports:
“This is the latest chapter of China tightening the noose around crypto,” said Antoni Trenchev, managing partner and co-founder of Nexo in London, a crypto lender.
Virtual currencies should not and cannot be used in the market because they’re not real currencies, according to a notice posted on the PBOC’s official WeChat account. Financial and payments institutions are not allowed to price products or services with virtual currency, the notice said.
Nevertheless, as with most things on this list, the announcement didn’t amount to anything specific yet.
BTC price chart on Bitstamp | Source: BTC/USD on TradingView.com
The US OCC Turns Its Eye To Cryptocurrencies
The newly announced Acting Comptroller of the Currency, Michael Hsu, revealed that the agency he presides, the Federal Reserve, and the FDIC are reviewing their policies on cryptocurrencies. This isn’t necessarily a bad thing, it might lead to clearer laws and stronger governmental support. Nevertheless, FUD doesn’t mind that fact. And FUD settled in.
Hsu’s statement to the Committee Of Financial Services reads:
Shortly after I started, I requested a review of key regulatory standards and matters pending before the agency. Those items include the 2020 Community Reinvestment Act (CRA) final rule and associated NPR related to performance benchmarks, interpretative letters and guidance regarding cryptocurrencies and digital assets, and pending licensing decisions. For each, the review is considering a full range of internal and external views, the impact of changed circumstances, and a range of alternatives.
Binance Under Investigation
The US government turned its eye towards Binance. Apparently, blockchain investigator firm Chainalysis found a pattern that showed a considerably higher percentage of funds from criminal enterprises flowed through Binance, compared to other exchanges. Bitcoin Magazine reports:
The world’s largest cryptocurrency exchange, Binance, is under investigation by the U.S. Department of Justice and Internal Revenue Service (IRS), according to a report from Bloomberg.
“As part of the inquiry, officials who probe money laundering and tax offenses have sought information from individuals with insight into Binance’s business.”
Even though it’s just an inquiry and nothing might come of it, the FUD it generated within the community cannot be ignored.
Related Reading | Market Sentiment Hits Low As Binance Has Largest Bitcoin Inflow Ever
India almost bans cryptocurrencies
A total crypto prohibition was on the table once again, but India’s lawmakers turned the ship at the last minute. Word on the street is that they’ll pass clearer regulatory laws instead. The Economic Times reports:
The central government may form a fresh panel of experts to study the possibility of regulating cryptocurrency in India, three sources privy of the discussions told ET. This comes amid the prevailing view that the recommendations by a committee headed by former finance secretary Subhash Garg in 2019 for a blanket ban on these assets had become outdated.
This new rumor arrived yesterday, but the FUD that a total ban inspires was around for a while.
Is This A Coordinated Attack? Or Is The World Just Going Nuts?
We can’t confirm or deny this was a coordinated attack on Bitcoin. Maybe the upper class, transnational corporations, and high rollers of all kinds want to buy your BTC at a discount. Market manipulation is as old as markets. But, maybe, this perfect storm of bad news is what happens when the best performing asset that the world has ever seen takes over the world’s headlines. All eyes turn to it, and all fingers start poking.
crypto vets pic.twitter.com/nsDzzLzMtv
— CMS Intern (@cmsintern) May 19, 2021
Featured Image by Jasmin Sessler on Unsplash – Charts by TradingView
Another Usual Bitcoin Crash: Bear to Run Short-Term, Bull to Follow It
The Cryptoverse insiders have tried to identify several causes for the latest bitcoin (BTC) fall that dragged the whole market down and it seems that history and arguments are once again repeating – many are bearish short-term and bullish long-term.
Today, BTC dropped below USD 40,000, and Crypto analytics firm Coin Metrics found it “inevitable” even before this happened. While BTC veterans appear to be “weathering the storm and continuing to hold for the long-term,” given the major upgrades coming this year, the analysts at Coin Metrics gave two reasons for the current drop.
First is Elon Musk’s changing positions on BTC and him moving back to dogecoin (DOGE), combined with Tesla removing BTC as a payment option, and their reason exasperating the Bitcoin energy consumption debate.
The second is the cyclical nature of crypto markets. “Despite the knee-jerk reaction to Musk’s Tweets, BTC’s recent downturn appears to be part of a larger trend. Crypto markets tend to be cyclical and move from periods of BTC domination to periods where smaller-cap assets reign supreme.”
And currently, we seem to be in an altcoin cycle, a big part of which is ethereum (ETH)’s surge and it outperforming BTC. Also, what the cycle led is the rise of “Ethereum competitors”, including ethereum classic (ETC), which resulted in BTC’s dominance dropping, as well as trading volume for smaller-cap assets surging.
Commenters online reiterated what had been reported earlier – that people seem to be rotating out of BTC into ETH.
Also, one more reason for the drop is once again repeating crypto ban FUD from China.
“This is the latest chapter of China tightening the noose around crypto,” Antoni Trenchev, Co-founder of crypto lender Nexo, told Bloomberg TV.
Then Matt Maley, Chief Market Strategist for Miller Tabak + Co, pointed to another potential cause that may have helped the price drop – Bank of America (BofA) fund manager survey showing that “Long Bitcoin” is the most crowded trade currently in the world.
“When an asset becomes the most crowded trade in the BofA survey, it has frequently signaled a near-term pullback in the past,” Maley told Bloomberg. “When you combine this with the news out of China, it’s not a surprise that Bitcoin is seeing some more weakness.”
And then there’s a full circle made, back to Musk, as his presence in the space may have actually damaged cryptos’ reputation, suggested David Bianco, Chief Investment Officer of the Americas at DWS Group. “I don’t think his comments are contributing to making [bitcoin] a more serious asset class. People look at it and think to themselves, this is just too much of a fad, it has too much popular culture attention,” he told Bloomberg. “Professional investors don’t want to hear about investments being talked about on Saturday Night Live.”
Many say that the price recovery will be slow, that a bear is imminent short-term, but that we’re in for a bull run after that.
Following China’s move and other developments, “Bitcoin investors are now in a state of fear, a situation that may influence further price drops,” Greg Waisman, co-founder of payment network Mercuryo, told Cryptonews.com. “Bitcoin’s recovery is, however, dependent on the coordinated effort by both retail and institutional investors to defy the market trend and load up on the coin. This recovery can occur at anytime as resistance is bound at this time.”
Waisman said that this drop is significant for the crypto space as most altcoins respond in tandem with the BTC price movement. “A continued fall without cushion may signal a broader entry into a bear market,” he added.
Per Coin Metrics, BTC spent output profit ratio (SOPR) dropped below 1 on May 15 to its lowest level since February 27, signalling that investors are selling at a loss. “This suggests that some investors who bought recently, while BTC price was near all-time highs, have capitulated and are selling their holdings.”
However, though not always accurate, a SOPR of below 1 has corresponded with local cycle bottoms. And this is not the only sign that “bullish sentiment has reset and that the local market cycle is nearing a bottom” – BTC perpetual futures average funding rates have come in closer to zero, at times even dipping negative.
Per Joe DiPasquale, CEO of crypto fund manager BitBull Capital, “bitcoin’s pattern over the last 10 years has been meteoric rises followed by pull-backs.” The trends has been higher highs and higher lows, he told Cryptonews.com, noting that, while it fell from its USD 63,000 high, it still saw a 300% rise in the past 12 months.
At 10:50 UTC, BTC trades at USD 39,142 and is down by almost 14% in a day. ETH dropped by 18%, to USD 2,874. Both cryptoassets are down by 31% in a week.
just setting up my twttr
— jack (@jack)
“The fall in price is a natural consolidation period that we see as necessary for the support lines to form for future appreciation. We remain bullish on bitcoin and confident that we will see bitcoin at USD 100K in the future. It has a place in a portfolio as a hedge against inflation and as a truly finite alternative to USD and digital alternative to gold,” DiPasquale said.
Crypto derivatives exchange Delta Exchange CEO Pankaj Balani opined that bitcoin’s recovery is going to be slow. Despite BTC’s sharp correction to some USD 42,000 at the time of the commentary, “we don’t think Bitcoin has found a floor yet,” he said, adding that,
“Unlike the previous dips in Bitcoin – in the last 9 months – this time, we are not finding any buyers looking to bottom fish on a sharp move down. Most traders are convinced of further downside and are looking at [USD] 35,000-38,000 levels on BTC.”
While he said the price will go up eventually, Ju Ki-young, the CEO of the crypto analytics provider CryptoQuant, wrote that he’ll “keep his bearish bias,” until the ‘whale dumping’ indicator “cools off.” Significant bitcoin deposits from whales usually indicate whale dumping, the firm said.
Here’s the historical data for this indicator. It’s the average amount of exchange inflows across all exchanges.
When it goes above 2 BTC, dumping is likely to happen. pic.twitter.com/5jNSN0VQC5
— Ki Young Ju 주기영 (@ki_young_ju) May 19, 2021
Also, according to QCP Capital, while there might be a bounce back towards USD 54,000, after that, for the most part “Q4 will be scary in the sense that [the US Federal Reserve System’s] Sep & Dec quarterly projections will no longer be able to hide the inflation impact, especially on the all-important long run.”
And, as is the case with every dip, the Cryptoverse is urging its (particularly newest) members to not panic – with some, like trader
Michaël van de Poppe, noting “panic levels not seen before” – to not give into fear, to not listen to criticism of BTC that follows every fall, and to just hodl.
Some also suggested using the chance to “stack more sats”; some noted that “a 40% drawdown in a bull market, regardless of news, regardless of how bad it looks, has empirically showed absurd profit if held”, and some argued that a “bounce is imminent” after the scared investors who bought at much higher prices sell, after which we’re likely to see BTC at USD 100,000.
This had all happened before, they said, and it ended with gains. However, as always, there are no guarantees.
just setting up my twttr
— jack (@jack)
16,835 #Bitcoin withdrawn from exchanges in last 10 minutes.
— Lex Moskovski (@mskvsk)
just setting up my twttr
— jack (@jack)
just setting up my twttr
— jack (@jack)
just setting up my twttr
— jack (@jack)
just setting up my twttr
— jack (@jack)
just setting up my twttr
— jack (@jack)
just setting up my twttr
— jack (@jack)
just setting up my twttr
— jack (@jack)
While #Bitcoin may still be up on the year for now, the vast majority of investors that have been relentlessly hype… https://t.co/y4V0GDe7bR
— Sven Henrich (@NorthmanTrader)
In the last 10 years, there were DOZENS of 20%-40% corrections in #bitcoin as we just witnessed from $64,600 to $42… https://t.co/7BbriEyenz
— Ronnie Moas | Nomad | Stocks | BTC | Charity (@RonnieMoas)
Traders love volatility – if they get it right, they do very well. Long term #Hodl ers love cheap #bitcoin & quietl… https://t.co/rEJk6AZ5Nk
— Jason Deane (@JasonADeane)
Re #ETHER price: $ETHUSD monthly chart below shows that as much as the drop has been intense, there’s still plenty… https://t.co/Xlm4r2Dax7
— Joel Kruger (@JoelKruger)
Investors becoming more fearful –
— Rafael Schultze-Kraft (@n3ocortex)
1. Fed expecting to do 2.5tn QE after vaccine confirmation and retail sales up 2. If 10y goes to 4.9%, interest pay… https://t.co/q3gznGeagQ
— Michiel Lescrauwaet (@MLescrauwaet)
Was Bitcoin Crash Orchestrated? This 4 Theories Scream Beware
With so much FUD floating the Bitcoin and crypto market, many have wonder if the recent price action was the result of a “coordinated attack”. Writer Rob O’Neill believes there are 4 potential main theories that could possibly explain recent events with institutions and “the ultra-rich” as the main catalyzers.
O’Neill claims these entities feel they “missed out” on the early days of cryptocurrencies and BTC. Thus, they are looking to gain more control over the space as they acknowledge that cryptocurrencies are here to stay. The new wealth created by BTC could be a threat against the establishment. O’Neill said:
(…) prediction 1. Over the next few years there will be numerous repeat efforts to crash crypto markets. These will be coordinated, and institutions + wealthy people will buy enormous amounts on the dips. We just saw one of these happen.
At this point, these institutions and wealthy could try to increase their crypto holdings for every major project, such as Bitcoin and Ethereum. In addition, they could receive government backing in exchange for the protection of fiat currencies. O’Neill said:
Prediction 2. Government will be used to strong arm & scam retail in order to advantage institutions & prevent retail from creating serious wealth. There will be taxes, coin seizures, and numerous regulations that inhibit retail from profiting & gatekeep on/off ramps.
Bitcoin’s Proof-Of-Work Under Attack?
The third prediction involves centralized exchanges and platforms with Know-Your-Customer (KYC) policies. In the past year, regulations have been proposed in the U.S. to try to obtain more information from these platforms and the so-called “covert wallets”.
Non have been approved so far and have received a push back from the crypto community. However, O’Neill said:
If you have coins on exchanges, especially KyC ones, you need to seriously consider this. They will tie names to wallet addresses & all the sovereignty of crypto will disappear… Unless you are smart & anon.
Another potential epicenter for an attack could be Bitcoin Proof-of-Work (PoW) consensus protocol. O’Neill believes narratives could be placed on energy consumption, e-waste, and other anti-environment arguments that could turn the public towards Proof-of-Stake-based projects. This could be “easier” to control by seizing a large amount of a cryptocurrency’s total supply.
In the end, I don’t know what will happen and I can’t tell the future. This is simply my analysis of what I think are the obvious plays against crypto from the “elite” and the kind of outcomes they will be looking for. Will they succeed? That depends. I think we’ll see a mix…
At the time of writing, BTC trades at $56,670 with 4.5% profits in the daily chart. Higher timeframes remain at a loss after this week’s crash.
Bitcoin Crash vs. Correction: Do You Know the Difference?
When the price of bitcoin declines, it’s common to see the terms “crash” and “correction” used more or less interchangeably. However, the two words actually mean different things.
A crash is widely regarded in traditional finance as an over-10% drop in price over the course of a single day.
These are often fueled by impactful, sudden changes in the crypto market that cause panicked investors to exit en masse.
While technical factors can have dramatic effects on bitcoin’s price, large crashes seem to be catalyzed more by fundamental circumstances such as macroeconomic events, major company announcements and sudden changes to international regulations and policies.
The largest crash ever recorded on bitcoin’s chart took place on April 10, 2013, shortly after the U.S. Financial Crimes Enforcement Network (FinCEN) shut down crypto exchange Bitfloor and announced bitcoin exchanges needed to register as “money transmitters.” Bitcoin prices collapsed over 73.1% in 24 hours, according to Bistamp data, from a height of $259.34 to a low of $70.
During more recent times, the infamous “Black Thursday” crash of March 12, 2020, takes the top spot as the biggest crash after prices fell 40%, from $7,969.90 to $4,776.59, following the World Health Organization’s declaring of the coronavirus a global pandemic.
A correction is characterized by a gradual decline where prices drop more than 10% over the course of several days.
These usually indicate bullish traders have become exhausted and need time to consolidate and recover. Exhaustion occurs when a majority of buyers has bought the underlying asset and there are no more new buyers appearing to support the uptrend. If sell orders continue to pile in without anyone on the other side of the order book buying them, prices start to fall.
Corrections can be influenced by minor events but tend to be initiated by technical factors such as buyers running into strong resistance levels, depleting trading volume and negative discrepancies between bitcoin’s price and indicators that measure its momentum like the Relative Strength Index (RSI).
Bitcoin is known for being a highly volatile asset. This means its price tends to fluctuate significantly over a relatively short period of time compared to other assets. It’s also why many traditional financial investors, including Warren Buffett and Carl Icahn, consider it a highly risky investment.
According to recent data, bitcoin’s one-year volatility stands at 32.7% – significantly higher than the next most volatile assets and asset classes, which are oil, U.S. stocks and U.S. real estate (18.8%, 8.41% and 7.15%, respectively.)
While this high volatility has its upsides, particularly during bull cycles where prices can rise dramatically, it also means prices crash and correct on a frequent basis.
Since Jan. 1, 2021, there have been seven notable price moves on bitcoin’s daily chart trading against the U.S. dollar. Four of these movements have been to the downside (red boxes) with a mean average loss of 25.94%, while the other three have been to the upside (blue boxes) with a mean average gain of 58.36%.
Knowing which downtrends are corrections and which ones are crashes can help you to better understand the market and how bitcoin traders react to certain fundamental and technical factors. In some events, crashes can foreshadow the arrival of a bear market and a prolonged period of cascading prices, whereas corrections can often be a sign of a healthy uptrend recovering to a support level before retesting a former high.
So the next time you see bitcoin prices dip into the red you should be able to tell if there’s a correction taking place or a crash, and whether or not the market is going through a healthy recovery or likely reacting to a sudden announcement.
Latest Bitcoin Crash Shows ‘Buy The Dip’ Mentality Among Big Investors, NYDIG Says
“Our desk has been a net purchaser over the past 24-48 hours,” Greg Cipolaro, global head of research at NYDIG, a bitcoin-focused investment manager, wrote Monday in an email to subscribers.
Cipolaro published the comments after bitcoin (BTC) tumbled from a record high above $64,000 last week to as low as $51,541 early Sunday. The largest cryptocurrency was changing hands around $55,400 as of 4:37 coordinated universal time (12:37 p.m. ET).
Bitcoin prices are still up 89% this year amid speculation that big investors are using the largest cryptocurrency as a hedge against inflation, in the wake of trillions of dollars of coronavirus-related economic stimulus over the past year by governments and central banks around the world.
“Institutional investors have had a buy-the-dip mentality during these risk-off events, suggesting increasing ease with handling bitcoin’s volatility,” wrote Cipolaro.
- “We believe the root cause of the sell-off had to do with investor positioning rather than fundamental news. Simply put, traders were overleveraged and positioned long, resulting in forced liquidations.”
- Cipolaro also noted significant BTC spot price discounts on Binance compared to Coinbase. “The difference in spot, which is usually very tight, reached nearly 3% at one point. To us, these data points are indicative of selling pressure in Asia rather than North America.”