What’s happening with Bitcoin, and what we might expect
The cost of the first cryptocurrency on May 19 for the first time since January fell to $30 thousand per coin. What is happening in the market, and can the rate go up again? LATOKEN experts will try to figure it out.
Over the past few days, the cost of Bitcoin has dropped by 33%, to $30 thousand. The leading cryptocurrency is trading at about $36,7 thousand. Since April 14, Bitcoin had fallen in price by half when the historical maximum was reached at $64,3 thousand.
The last time such a collapse occurred with Bitcoin was in March 2020. That time the price of the first cryptocurrency in two days fell by more than 50% — to $3,7 thousand.
What’s going on
It is quite obvious that a negative news background provoked the sale and liquidation of positions. But the $ 30K level will be a strong obstacle to a further decline, as it was the support level in January and February. Most likely, large funds will now buy Bitcoins to prevent further decline.
Over the past week, there has indeed been a lot of negative news for the cryptocurrency market. On May 12, Tesla announced a temporary suspension of Bitcoin sales of electric vehicles due to the non-environmentally friendly way of mining them. Elon Musk also spoke somewhat critically about the main cryptocurrency, doubting its decentralization and calling the level of electricity consumption by Bitcoin insane.
Also, on May 13, it became known that the US Department of Justice and the US Internal Revenue Service launched an investigation against the Binance crypto exchange. Regulators are checking the platform for violations of tax and anti-money laundering laws.
On May 16, a cryptanalyst tweeted that investors would be saddened if they learned that Tesla had sold all of its Bitcoins in the next quarter. To this, Musk, in his usual manner, answered evasively, using the word ‘indeed.’ But the market took this tweet as confirmation of such a possibility.
Musk even unequivocally denied it. On May 19, after the collapse of Bitcoin to $30 thousand, he posted a tweet containing the word Tesla and emojis of hands and a diamond. Usually, “diamond hands” refers to investors who hold an asset despite fluctuations in its value.
Against the recent drop and negative news background, investors began to withdraw funds based on Bitcoin. During the week, $98 million was withdrawn, according to analysts from CoinShares.
On May 18, Bitcoin quotations continued to decline amid a new cryptocurrency ban in China, where financial companies were banned from providing services related to digital assets.
What does it mean
Formally, overcoming the $32 K mark may mean a global trend change to bearish. A small impetus was also caused by a panic sell-off — fixing of losses by private investors under the influence of emotions. This has also exacerbated the fall.
In the short term, the market may partially win back the fall in the coming days, but now the risks are much more significant. Many experts recommend closely monitor the situation to be able to assess the consequences of what happened.
No worries; it has already happened before
In 2018, a drop in cryptocurrency quotes led to the beginning of a long-term correction that lasted almost two years. If in December 2017 the Bitcoin rate reached $20 thousand, then by mid-February 2018, the value of the main cryptocurrency fell by 62% to $6,8 thousand, and a year later from reaching the maximum — to $3,1 thousand. The cryptocurrency updated its maximum only three years later, at the end of 2020.
There are no sufficient prerequisites for the collapse of Bitcoin to $12–15 thousand. If Bitcoin stays at this level, then in the coming weeks, it might move to growth again. In this case, prominent players will again start buying assets from retail investors.
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LATOKEN crypto exchange does not provide any investment, tax, legal, or accounting advice. This article is written for informational purposes only. Like other assets, cryptocurrency is subject to market risk. Please do your own research and trade with caution.