After a real bloodbath last week, the price of Bitcoin seems to be stabilizing.
In fact, the price of BTC is still on the order of 15 percent over the past seven days. The 24-hour charts, however, show something more optimistic: Bitcoin is up more than 5 percent after rising steadily from $ 36.3,000 yesterday to around $ 38.5,000 at the time of going to press.
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Additionally, Bitcoin’s stabilization appears to be mirroring itself in the Ether (ETH) and Altcoin markets in general. ETH fell by 25 percent in seven days and by 15 percent in 24 hours. Binance Coin (BNB) is down nearly 34 percent in seven days, but around 20 percent in 24 hours. Similarly, the week-long drop in XRP of 35 percent is achieved with a 24-hour increase of nearly 20 percent. The DogeCoin (DOGE), Cardano (ADA) and Polkadot (DOT) charts tell similar stories.
It’s almost enough to believe that rays of hope could pierce the fate and darkness that plagued the crypto markets last week. But is this delay in cutting crypto prices really the end of the nightmare? Or is this just the beginning of a long, dark night?
What caused Bitcoin to fall?
The causes behind the massive decline in Bitcoin seem pretty clear. The big news that broke last week was a joint announcement from the China Internet Finance Association, China Banking Association, and China Payment and Clearing Association. The note clarified that China plans to crack down on the cryptocurrency.
In particular, the statement prohibited financial institutions from working with crypto companies: “Financial and payment member institutions may not offer their customers any services relating to virtual currencies or offer their customers directly or indirectly crypto-related services, including crypto trading, custody, lending and Completion ;; Accepting virtual currencies as a means of payment; Exchange of virtual currencies with the RMB. “
Additionally, the note states, “Virtual currency prices have risen and fallen sharply lately, which has produced results [in] a recovery in speculative trading activity in virtual currency. It has seriously compromised the security of people’s investments and damaged normal economic and financial systems. “
While China was expressing its intention to contain crypto, Bitcoin took another blow from a rather unexpected source. Elon Musk, founder of Tesla, abruptly announced that his company would no longer accept BTC payments, citing environmental concerns. While Musk clearly stated, “Tesla will not sell any BTC on its balance sheet,” this move appeared to have had a negative impact on the price of BTC.
Additionally, analysts have indicated that the negative impact of both news items was compounded by the liquidation of a large number of positions with excessive leverage. The stock screening platform StockstoTrade’s Twitter account noted, “This Wednesday when #Bitcoin and #cryptocurrency crashed, 775,000 over-leveraged accounts were liquidated (completely wiped out), resulting in total losses of over $ 8,000,000,000.”
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Is BTC’s Newest Round of FUD Old News?
Together, these three factors have contributed to some sort of “perfect storm” of bad news for Bitcoin. While the long-term effects of each of these messages may not be fully realized, the short-term crash may have come to an end.
Samson Mow, CSO of Blockstream and CEO of Pixelmatic, told Finance Magnates, “We have hit rock bottom and I would say Bitcoin has stabilized.”
“There have been a number of recycled FUDs (Fear, Uncertainty, and Doubt) about Bitcoin that have scared new investors, but most have already panicked selling,” he explained. “At this point, seasoned investors and HODLers have been buying the dip steadily – it just takes time for the dollars to hit the barter accounts and the pressure to buy over the panic sales.”
The term “recycled FUD” refers to the fact that the problems Bitcoin is currently facing appear to be replicas of problems it faced before. After all, this isn’t the first time the Chinese government has spoken out against crypto: Bitcoin saw a serious drop in prices in 2017 when China banned domestic cryptocurrency exchanges and ICOs.
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“Media reports have influenced the Bitcoin price more than the other way around.”
Regarding Tesla’s decision to stop BTC payments for environmental reasons, many analysts agree that Bitcoin’s environmental issues are a moot point. Yes, BTC does have a large carbon footprint, but so does the traditional financial system. Others argue that most of the electricity used to generate Bitcoin is generated from renewable sources.
The bottom line is that these topics are definitely not new, they have been around in the BTC markets for years and discussions about their implications continue. With so many new investors entering the Bitcoin market this year, this news, which has come in various forms in the past, could strike new ears.
As a result, “media reports have influenced the price of Bitcoin more than the other way around,” Mow said.
“Many reputable sales outlets have picked up badly researched reports and multiplied their impact with sensational headlines,” he argued. “Coupled with the ‘Elon Musk Effect’, this dropped the market and led to cascading futures liquidations, which in turn caused panic among many investors.”
“But just as the effects of Elon’s tweets are noticeably waning, the current narratives will soon become old news and their impact on price will be negligible – until the next cycle.”
How low will Bitcoin be?
The “Elon Musk effect” is currently noticeable on the Bitcoin price. Paul Sundin, founder, CPA and tax strategist at Emparion, told Finance Magnates: “When a well-known bitcoin influencer like Elon Musk publicly announced that Tesla would no longer accept bitcoin currency for purchasing its vehicles, this is like one Announcing to the public that you have withdrawn your trust as an investor. “
This leads to “panic selling” by “newcomers and dependent investors who only reflect their investment strategy from Elon Musk”.
But how low could this musky effect drive the price of Bitcoin? “While I can’t say when it will stabilize, the decline will only be short-term,” Sundin told Finance Magnates.
“It will most likely go back to its 200-day moving average … down to $ 40,000 compared to just under $ 44,000 now,” he said. “The decline is, in my opinion, an opportunity for this very volatile market to make corrections and the market will most likely recover before prices can go down.”
Doug Schwenk, chairman of Digital Asset Research (DAR), believes Bitcoin prices may have bottomed out.
“Bitcoin trades on sentiment for the most part, which can lead to almost any outcome, but the psychological benchmarks of previous stable levels or rounded numbers are often meaningful,” he said. To that end, “$ 30,000 appears to have been a natural level of support as the price rose from the low of $ 30,000 last week to $ 40,000.”
“Unless the news comes in with more surprises (and Elon keeps his comments in check), we likely won’t see any further declines in the near future.” There have been positive net institutional buyers who viewed this as a buying opportunity and this helps support the price. “
(So far, Elon appears to be behaving. On Monday, he tweeted that he “spoke to North American bitcoin miners. They have committed to posting current and planned renewable energy uses and asking WW miners to do so. Potentially promising (sic). “)
“$ 100,000 is still in the game this year” for BTC: Samson Mow
Despite the price drama of the past two weeks, Mow believes, “$ 100,000 is still in play this year.”
“None of the current events has impacted the fundamentals of Bitcoin. In fact, none of the ‘concerns’ are actually new,” he said. “Bitcoin is still the best form of money we’ve seen, and it still serves as a strong hedge in times of uncontrolled monetary stimulus.”
“If you look at the demand for Bitcoin, it remains unchanged. Companies are still adding Bitcoin to their balance sheets, coins are still being moved from the exchanges to the cold store at increasing rates, and famous athletes are still demanding payment in Bitcoin.” And remember that in three years we will have another halving event. “
While the recent round of pricing drama may have come to a close, this likely won’t be the last time BTC has seen high levels of volatility.
“Bitcoin’s price is likely to remain volatile until we exceed gold’s market capitalization – that would be around $ 500,000 per bitcoin,” Mow told Finance Magnates. “We’re already seeing a decrease in volatility, which is a good sign. New Bitcoin-focused financial products are also likely to hit the market that will reduce volatility and fluctuations.”