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With BTC losing $ 10,000 of its value in 14 hours, it’s worth questioning what’s next for coins across the ecosystem and whether this latest move signals the end of the bull market.
The bullish sentiment towards Bitcoin was widely shared after the cryptocurrency fell in October and early November All time high had broken through. In particular, Standard Chartered market analysts predicted, among other things, that BTC could hit the staggering $ 100,000 in 2021 – This could potentially trigger a broader market move that would cause other assets to rise to new highs as well.
The main drivers of this bullish sentiment included the launch of Bitcoin’s own exchange-traded fund and the adoption of cryptocurrency by the government of El Salvador as legal tender.
However, after a slightly disappointing November, the price of BTC fell sharply in the opening week of December in a crash that sparked slumps across the crypto ecosystem.
As the graphic above shows, Ethereum also suffered a drop of around 20% in the wake of the decline in Bitcoin price. The loss in value of the ETH was particularly disappointing, as the coin had last broken its all-time high at the beginning of November.
At both BTC and ETH, assets struggled to regain their values immediately after the slump, with trading volume falling around 24 hours after the initial price crash.
Maxim Manturov, Head of Investment Research at Freedom Finance Europe, warns of a possible market crash in November:
“There is a risk of ‘starting’ with FOMO, whatalong with significant volatility inherent in crypto assets can result in a relatively strong pullback if risk appetite decreases and the sloped channel does not break out. Hence, one should be careful about current levels and understand the speculative nature of such assets.
“Overall, the recent Bitcoin rally reflects the wider use of the coin as a hedge against inflation and the availability of enormous liquidity in the markets through low interest rates and QE (Qualitative Easing). “
But what actually triggered the current decline in the cryptocurrency market? And is it still possible for assets to regain the bull run that saw many coins break their all-time highs in early November?
Why are cryptocurrencies falling?
Bitcoin started falling on Friday, December 3, 2021, as a result of a major pullback in the stock market that caused investors to divert their holdings into government bonds. On Wall Street, higher-risk tech stocks were among the biggest troubles, with Tesla losing around six percent of its value. In addition, the ARK innovation fund lost five percent at about the same time and a total of 12 percent over the week.
While there wasn’t a clear trigger for the cryptocurrency collapse, it seems likely that lower sentiment in technology stocks led investors to choose to dump their crypto assets as well.
JC Parets, Chief Marketing Strategist at All Star Charts, said:
“The evidence suggests this is another derivative-induced selling event. The September flash crash had the same drivers as this sell-offThe leverage was forcibly flushed out of the system, which later allowed the market to finally climb to a new all-time high in October. “
Parets’ words seem to suggest that in the long run this may not mean the end of the cryptocurrency bull run. But could we see a turnaround in the fourth quarter? Or could BTC have a strong start into 2022?
Can we expect a recovery in 2021?
Although Bitcoin lost $ 10,000 in value in a matter of hours, Shiliang Tang, chief investment officer at LedgerPrime, a cryptocurrency investment management company, believes the recent decline in the market was a net positive for future BTC price developments.
“That slump certainly followed the decline in stock prices we saw on Covid-19 fears and inflation concerns. However, although crypto and stock markets tend to fluctuate at the same time, they are different marketsand crypto in particular is on a strong bull cycle.
“Also the on-chain metrics for Bitcointhe king crypto to track down in a bull run are still strong. More coins are withdrawn [of] Exchange than to flow on them. That means that once this washout is complete, we should experience a supply shock that will see the price of Bitcoin skyrocket. “
While there was little evidence of such explosive growth after the price rallies in early November, it may have taken a large-scale sales event to spark a cleanup process across the cryptocurrency market.
“If anything, this slump did more to wash out those cowboy leverage traders and in turn create healthier conditions for further price hikes in the near future.”
Time is slowly running out in a month that has promised so much for Bitcoin’s price activity. With many analysts setting the fourth quarter as the stage for the cryptocurrency’s final seismic rally for the coin’s third halving event, investors might be eager to look for signs of life before trusting a price rally is in sight.
However, given widespread inflation and the ongoing Covid-19 pandemic that is constantly affecting traditional stocks and shares, the dream of $ 100,000 worth of BTC may have to wait a little longer.
Dmytro Spilka is a London-based financial writer and founder of Solvid and Pridicto. His work has been published in Nasdaq, Kiplinger, Financial Express, VentureBeat, and The Diplomat.
Featured image: Shutterstock / 3DJustincase
The article Backtracking Bitcoin – What is driving the recent crash of the cryptocurrency market? first appeared on The Daily Hodl.
Source: Crypto News Deutsch