Bitcoin (BTC) is approaching nearly $ 40,000 this week as “Dogefather” Elon Musk hands out pure pain to the Hodlers – what’s next?
After a traumatic weekend for many crypto investors, Monday sets the stage for the next chapter on the wild bull market in 2021.
Cointlegraph examines five factors that could influence the next steps Bitcoin and Altcoins take.
Musky Tweet hits the technical level of Bitcoin
This week it’s all about one man again: Elon Musk. Characteristically, the CEO of Tesla and SpaceX caused an uproar on Twitter when it came out bearish on Bitcoin.
BTC / USD sold immediately upon news that Tesla was halting BTC payments on its products, but that wasn’t enough for Musk.
Further tweets over the weekend, including criticism of Bitcoin’s decentralization and how he “believes in crypto,” added fuel to the fire.
It was an indication that Tesla may already be planning to sell its holdings, but that caused the greatest misery. Bitcoin fell to nearly $ 42,000 and retested that previous all-time high before stabilizing when Musk stressed that no sale had taken place.
“To clarify speculation, Tesla has not sold Bitcoin,” he wrote on Monday.
As a result, since Musk looks like a war against the cryptocurrency community, Bitcoin is unsurprisingly volatile with all eyes on the Twitter battlefield.
At the time of writing, Bitcoin was trading at around $ 44,800, down 8.7% over the past 24 hours.
However, as analyst Alex Krueger noted, the clarification tweet could inadvertently act as a local bottom signal as Musk was just posting it when BTC / USD hit a major 61.8 Fibonacci retracement level.
“Elon Musk has to be a great technical analyst,” he commented.
“His tweet,” Tesla did not sell Bitcoin, “was published at exactly the most important technical level of Bitcoin, the 61.8-fib ($ 42,845).”
BTC dominance falls below 40%
Musk’s activities have adversely affected both Bitcoin and Altcoins.
Although Dogecoin (DOGE) continued to receive praise, even the meme-based token couldn’t avoid losses over the weekend as the majority of large-cap altcoins followed Bitcoin.
There were some less significant losses, such as Cardano (ADA), which still bucked the general downtrend on Saturday and even made new all-time highs.
However, in relation to the bear market, nothing shows how much the average Bitcoin holder is suffering from dominance.
On Monday, Bitcoin’s total market capitalization share fell below 40% for the first time since June 2018.
Already on the way out, the dominance was dealt a heavy blow thanks to the recent price pressure on Bitcoin, while altcoins like Ether (ETH) benefited from it.
“Bitcoin dominance is still waning,” summed up popular Twitter retailer The Moon over the weekend.
“The old season is not over yet. But I have a feeling that the end is near! “
Bitcoin basics keep you calm
Despite all the nerveracking price moves, nothing offers a bullish counterpoint to the current Bitcoin narrative than the network fundamentals.
Even after falling to $ 42,000, Bitcoin is more attractive to miners than ever, and its network security is therefore more solid than ever.
As Cointelegraph reported, both hash rate and difficulty have miraculously rebounded in recent weeks, recapturing all-time highs after a miners wash out caused its own brief price drop.
The weekend was no different: the weekly average hash rate was over 180 exahashes per second for the first time.
Difficulty is still on track to climb over 10% on the next automated adjustment in 11 days. The previous adjustment on Friday was the largest positive shift since June 2014 at 21.5%.
“Bitcoin’s mining troubles, which hit an all-time high in the immediate aftermath of Tesla’s announcement, are a kiss from the chef,” said Alex Thorn, director of corporate research at crypto merchant bank Galaxy Digital, last week.
Dollar bounces in support
If you take a break for crypto-specific triggers, the wider macro image can still provide inspiration for price action.
The strength of the US dollar is returning after the collapse at the end of last week. The US dollar currency index (DXY) is bouncing back from familiar support – a surge in strength tends to cause teething problems for BTC / USD.
At the same time, stocks in China are bullish but are doing average in Europe and the US. The coronavirus, with localized peaks in some countries but fewer cases in others, is joining the melting pot.
For traders, however, inflation is a key issue. A broad global recovery from the time of lockdowns and other restrictions creates problems for those who try to construct them – especially the US Federal Reserve and other central banks.
“The recovery of the world economy is in full swing. This is what is fueling inflation fears, ”Olivier d’Assier, Qontigo head of APAC applied research, told Bloomberg.
After the rapid year on the stock markets, the appetite for profit-taking will understandably increase.
Bitcoin is still beating its last bull market
Is it 2013 or 2017 in terms of the bitcoin bull market?
There is no evidence of a bear market among the best-known names in the industry – all that remains is to analyze the type of current retracement and compare it with previous years.
This week, stock-to-flow developer PlanB notes that despite all of the Musk drama, Bitcoin is still performing better than it was in 2017 at $ 20,000. This is despite the official drop of $ 42,000, officially the largest Bitcoin cycle in this bull cycle, and since the cross-asset crash in March 2020.
“Today feels like the 2017 bull market (especially during the fork war),” he tweeted Monday, remembering the birth of Bitcoin Cash (BCH).
“It’s not a straight line to the next ATH, but a lot of volatility (multiple drops of -30%). HODL.”
The demand for calm and downsizing is an important characteristic of experienced bitcoiners. As Cointelegraph reported last week, the flow of stocks through Musk or some other episode of downside volatility remains unharmed.
A companion poll found that a majority of 35,000 respondents believe BTC / USD will still hit $ 100,000 this year.