If you are from the planet Earth and crypto enthusiast, you probably know that the market is undergoing a setback. Some may call it a crypto crash. However, what really is behind this sudden market sentiment reversal may not be so melodramatic after all. It may even be completely realistic and expected.
But let’s start at the very beginning, shall we?
During the last two months, the cryptocurrency market has been on the rebound. Just to better describe the ongoings, let’s say that the leader of the pack, Bitcoin (BTC), scored 64% profit for its investors. Furthermore, some cryptocurrencies like Wax (WAXP) or Powerledger (POW) recorded more than 100% gains in the same period.
Despite some really insane examples of overbuying sessions, let’s take Bitcoin as a pivotal point of discussion.
A 64% profit in two months is an unbelievable score. So much so that an individual who would be unwilling to take his profits can easily be called insane. If not insane, then overoptimistic to say the least. Since the majority of investors are really not that insane, they took their profits. Since there was no new money in the market, the surge, naturally, slowed down and, eventually, the trend reversed.
Is This a Crypto Crash?
Well, it depends on who is looking at it.
If some of our readers are among those moon boys who went all-in at $10,000 with x50 leverage on BitMEX, yes this is a disaster. However, we sincerely do hope that there aren’t many who did that. On the other hand, those more realistic may easily look at this as a perfectly normal correction.
If there are those who taught that Bitcoin is going to $20,000 in a straight line without testing at least a few resistances, please, stop reading. The rest of this article isn’t something you would understand.
Now that we got that out of the way, we can mention our technical analysis published on Friday, February 21st. It was then when we revealed a few reasons for the correction that started a few days afterward and is still ongoing. However, besides the TA, there may be more things in play.
Is Crypto Immune to Global FUD?
Technical analysis is quite often a good basis for trading decisions. Nevertheless, there is much more to assets’ prices than fits inside the chart. The Coronavirus COVID-19 pandemic is a global phenomenon that surely has much to do not just with crypto but other markets as well.
The all-encompassing FUD (Fear, Uncertainty, Doubt), or better say, widespread panic, perhaps has a lot more to do with a crypto dip than meets the eye.
The stock market is in the red and on the verge of panic. On the other hand, cryptocurrencies have often been viewed as a form of safe haven once the traditional markets crash. Still, in order to understand why it could be so, one has to be familiar with the basics of the underlying technology.
If Bitcoin keeps declining more, it will be a clear example that, despite leaning on entirely different technology, crypto isn’t immune to the traditional, old-fashion FUD. The question that we, the crypto enthusiasts often end up asking, “where is the money going to go once stocks crash” will be answered.
The answer is – nowhere.
Investors are going to keep out of the market until the sun rises again. Because the majority isn’t there for tech but for the money and doesn’t really understand what they are investing in.
The Greater Mixup
In order to understand why it turned out to be so, let’s take a look at the direction that the crypto community has taken during the last two years.
Since the biggest bull run in the history of the planet in 2017, many things changed. Before you could hear the word Bitcoin on CNBC’s “Fast Money” show, builders were the most talked-about individuals in the crypto industry.
I am talking about Dan Larimer who was involved in BitShares, Steem and its ecosystem, and EOS. Maybe even more than him, Ethereum’s Vitalik Buterin was the subject of many discussions. Charles Hoskinson right after those two.
However, obviously, times changed.
These days, across the social media, the most talked-about crypto-related individual is Changpeng Zhao, or better known as CZ, the founder of Binance. Binance is among the biggest centralized cryptocurrency exchanges in the world. So, to set the record straight, as a centralized business, Binance is working with decentralized assets. And even with being aware that it is so, the crypto community has put him on the pedestal.
Nothing against CZ personally, but there are many people more important for the industry than him. Therefore, this example clearly shows that, while crypto has the power to change the way people think, people are unwilling to accept the change. Just the same as with CZ, the CEO of Tesla is, unfortunately, more important than the man who the company stole the name from. Yes, the one who invented some more important things than Satoshi Nakamoto did. Until these things change back again, we can expect crypto to be vulnerable to the same issues as the traditional systems.
Not the Last “Crypto Crash”
Despite all the negatives we talked about, there is still a light at the end of the tunnel. Overall, since we are true believers, we remain bullish for BTC as well as for the rest of the market. Even more so because of the widespread greed that undoubtedly surrounds the industry. Nevertheless, you would be wrong to expect another surge to come without being followed by the correction.
Therefore, if you’re easily swayed by “to the moon” or “to $0” Tweets, simply don’t trade. It’s bad for you. Instead, HODL. You will be more profitable that way. Because this is far from the last occurrence of this type you are about to see this year.