Although the market appeared to have bounced back after Bitcoin reclaimed $40k yesterday, the flagship currency has dropped to $37,000 on news that China was clamping down on mining activities.
Several analysts have weighed in on the market correction, as well as how Bitcoin might be primed for a natural price recovery. Here’s a quick rundown on the events that triggered the latest retracement.
Let’s blame Elon MuskTo be fair to Musk, the current dip cannot be pegged to a single event or news. However, it all started with the CEO’s bearish tweets about Bitcoin about a week ago. As reported by BTC PEERS, Musk recently announced that Bitcoin would no longer be used as payment at his electric-car company Tesla (NASDAQ:TSLA), citing environmental concerns.
It is hard to ignore that Musk has been quite instrumental to the crypto market uptrend. His open endorsements of Bitcoin and meme coin DOGE have sent both digital assets soaring in the past. Recall that Bitcoin climbed to $43k on an announcement that Tesla had purchased $1.5 billion worth of Bitcoin back in February. Similarly, the price of Dogecoin reacted positively to tweets from the CEO when he dubbed it “the people’s crypto.”
When Musk announced that his company was no longer accepting Bitcoin, he created fear, uncertainty, and doubt (FUD) in the market. Bitcoin immediately fell below $50k. Furthermore, there were rumors that Tesla was going to dump its Bitcoin holdings, a claim that the CEO has dismissed.
In general, the tweets of Musk were pivotal in kick-starting a market correction.
Meanwhile, analysts at JPMorgan Chase (NYSE:JPM) have claimed that investors are now shifting their attention and money to gold futures, which coincidentally has recorded some positive numbers lately. According to the analysts:
Although there has been an active ban on cryptocurrencies in China since 2017, the new rules have expanded the scope of prohibited services on the premise that “virtual currencies are not supported by any real value.”
On May 18, it was disclosed that three associations operating under the Central Bank of China had issued a document stopping institutions from conducting digital currency businesses. Members of the public were also warned not to participate in any cryptocurrency business. The announcement implies that financial institutions and payments companies will not be allowed to provide any services related to crypto transactions. These institutions must not offer clients any service involving cryptocurrencies, including registration, trading, or settlement.
Amid the negative news, the crypto market has continued to slip into “Extreme Fear.” As of press time, the Crypto Fear and Greed Index had dropped to 12, down from 19 the previous day and 27 a week ago.
Leverage-fueled lossesOther theories are offering an insight into the latest market dip. Chris Keshian, a former hedge fund manager and cryptocurrency trader, offered some clarity on what is happening. He explained:
An oversold market?Keshian goes further to say that the crypto market has become “oversold.” Michael Gu, a crypto analyst, shares similar views. In his case, he said that “Overselling was caused by heavily leveraged positions in crypto – so an initial dip caused a chain reaction (longs get sold causing prices to go down, causing other longs to get liquidated).”
Commenting on why Bitcoin climbed back to $40,000 yesterday after dropping to $30,000, Keshian noted that:
Bitcoin’s future outlookIt is unlikely that Bitcoin would reclaim $60k this month. Vinny Lingham, co-founder & CEO of Civic, tweeted that the flagship cryptocurrency will probably fluctuate between $40,000 and $50,000.
Things are not looking so good for Bitcoin in the short term. Similar crackdowns and restrictions from other countries could send the digital asset crashing even further. But looking at the bright side of things, Bitcoin fanboys would argue that this is an opportunity to buy the asset at a cheap rate. Avinash Shekhar, co-CEO of Indian-based crypto exchange ZebPay said:
Continue reading on BTC Peers
Source: Cryptocurrency - investing.com
