The crypto world has always had its ups and downs and has always been as uncertain as (well..maybe a little more) any other market. The reasons might not be the same every time though. Let me take you through the reasons I think the bitcoin market went down yet again just about a few days ago.
Possible source number 1
A random trend in the crypto investors where they get over excited and think that the currency will indefinitely reach $100,000 by the end of the month or so. And when it does not, the investors come to a decision that the currency has lost it’s momentum (for now) and that leads to a sell off in order to make profits while it lasts.
Of course, they get excited and greedy again, buy coins again…the cycle continues.
Possible source number 2
This is probably there most famous and most accepted reason to be a catalyst to the sell off of bitcoin. You guessed it right, ELON MUSK!
Noe let’s get dive a little into the past. In the year 2018, SEC ( U.S Securities and Exchanges Commission) charged Elon a $40 million penalty for tweeting-
“Am considering taking Tesla private at $420. Funding secure”
August 7th, 2018
Now, since cyryptomarkets are not regulated, Elon does not have the same responsibility to bitcoin holders that he has to Tesla shareholders. So it is my understanding of the situation that maybe this is just Elon having fun with the institution that SEC is indefinitely a part of. The thing with the bitcoin market is that, it is so small when compared to stock markets. For example, the U.S stock market is 71 times bigger than bitcoin. We all know how hedge funds have been manipulating a market as big as the stock market for the longest time now. It should therefore be of no surprise that an influential person like Elon Musk could manipulate the bitcoin market that easily. Let’s take a look at the trend of the things:
March 2020- Tesla and Elon secretly buys bitcoin. Spends $1.5 billion. Doesn’t announce this until later.He then uses twitter to hype cryptocurrencies and as a result the price shot up.He then announces his purchase of bitcoin and also announces that Tesla will be accepting bitcoins as payments.
May 12th- He announces that Tesla will not be accepting bitcoin as payment. Environmental reasons. Result, drop in price.
May 16th- He hints that might be selling his bitcoin and as a result the bitcoin price drops further.
May 17th- He says that he has not sold his bitcoins and the prices rise a little again.
It is important to take note that only if and when the bitcoin market cap reaches a trillion dollars, it will become a strong enough market that will no longer be easily manipulated by billionaires and influencers.
Possible source number 3
China!
China has always been a major market manipulator (2011, 2013, 2017). Speculations that China is banning cryptocurrencies have come into play once again and have caused the downfall in the bitcoin value. Truth although is that, China is not trying to ban it altogether but rather tighten the regulations. They were merely informing the banks, brokerages and financial institutions that they do not want to provide any crypto services to the people as they do not recognise it as a currency (due to it’s risk etc.). But technically, you are still allowed to legally own crypto in China. My basis to this you ask? If China wanted to actually ban bitcoin, it would’ve also banned trading, ownership and mining of bitcoin. Fact is, 50% or more of bitcoin hashing power comes from China.
Possible source number 4
Another trend in the market that could be noticed on may 12th is the inflation in the US market that came in way above expectations. There could be a link there. Bitcoin must have also crashed because the investors could’ve been worried about the inflation. A fear that the Central Bank will pull out all the liquidity that it has been pumping into the market could have caused this fear. The risk being, an asset like bitcoin which thrives on the money printing/ debasement narrative becomes a lot less appealing.
Despite all these ups and downs in the crypto market, I still do believe it is a strong market that just needs time to get itself refined. In fact, after every dip in the past, came a spike; the 2017 spike of 1325% return came after a series of downs:
March had a down of -34%
May had a down of -35%
June had a down of -39.6%
September had a down of -40%
November had a down of -20%
Quite recently, June 2019 — March 2020 saw a downfall of -60.8% and ended the year in +88%
So, hang in there y’all! For the crypto market can be quite unexpected.
