Those who survive will tell the tale. That is exactly the situation in the market during the last couple of days. Since the cryptocurrency market crash of March 12th, there have been a lot of speculations about the direction we’re moving in. The global market capitalization lost 35.8% of its value as it dropped from $223 billion to $143 billion. The biggest coin by market cap, Bitcoin (BTC) plummeted 50% in 24 hours, dropping below $4,000, which wasn’t seen since March 2019.
What caused the crash?
How long is it going to last?
Is Bitcoin going to $1,000?
These are just a few questions that dwell inside the FUD-entangled minds of the majority of investors. Therefore, to ease your suffering at least a bit, we are going to try to provide some answers.
What Caused the Cryptocurrency Market Crash?
The easiest thing to do would be to put all the blame on the COVID-19 pandemic that pushed the whole world on the verge of panic. And the coronavirus definitely has something to do with the decline of the cryptocurrency market. Once the WHO (World Health Organization) officially declared that the world is in the coronavirus pandemic, all hell broke loose. Investors started withdrawing funds from the market. Naturally, in the midst of the sell-off, crypto also took a big hit.
Do They Know About Crypto?
This would be an easy way of looking at things. However, why did crypto take the most detrimental blow when enthusiasts always regarded cryptocurrencies as an alternative to traditional markets?
Isn’t it supposed to be crypto which should protect people’s funds when the global economy takes a dive?
Answers to these questions have nothing to do with the coronavirus.
As we discussed in the column published on February 27th, the crypto market isn’t what it was 3 years ago. The lastest mega-crash confirmed that nowadays, there are far fewer investors who are here for the technology. This means that the only thing crypto means to the majority of investors is a means to make a buck. Perhaps they are not even aware of the permissionless and censorship-resistant nature of these digital assets. If they were, they would consider remaining in cryptocurrencies because (the short version):
- If the global economy sinks into a deep depression, governments will lounge to rescue big corporations at the expense of an average Joe
- Huge inflation will be the result of governments trying to salvage the system
- Ideal assets for times like these are those who have a fixed and predictable inflation rate
- The only way investors can protect themselves is to stay away from government-controlled assets
- The best option we currently have are cryptocurrencies
Nevertheless, the majority of cryptocurrency investors are, obviously, unaware of this. Thus, they behaved like they are in a government-controlled market and pulled away.
The Technically Predicted Crash
Another way to look at this situation is from a technical angle.
A lot of people got burned and they don’t want to hear that someone predicted the crash. Therefore, this is currently the most unpopular theory. Nevertheless, the fact of the matter is that there were people who forecasted these prices more than a month ago.
CoinSyncom published a technical analysis on February 10th, in collaboration with the trading expert Ivan Andrejević. The article clearly describes the possibility that Bitcoin could drop to the $3,500 level. Of course, predicting a 54% decline will always run into a huge criticism of the ever-positive crypto community. Regardless, a few days more than a month since, it all unraveled just like our analysis forecasted.
We are not saying that we owe today’s price to the TA exclusively. Yet, we can’t rule out that the stone-like resistance at $10,500 had something to do with the devaluation of your favorite coin. If you want to see the analysis with your own eyes, click the button below.
How Long is This Going to Last?
At the moment, this may as well be a million-dollar question. Nevertheless, there are a few possible outcomes (well, aren’t there always?).
We know that the Bitcoin halving is on the way. Still, historically, Bitcoin never reached an all-time high in the year of the halving. At the same time, BTC never in its history came so close to halving in the middle of such a bearish sentiment. These facts reveal that there may not be much reason for optimism
Another possibility is a more optimistic one. Let’s say that cryptocurrency investors recognize the benefits of cryptocurrencies. Especially during the global economic crisis. In this scenario, the crypto market will behave counter-proportional to the traditional markets. This means that retail investors, inspired by the five reasons we mentioned, will flood into the market. This will bring an influx of much needed fresh money that will drive the price towards $10,000 again.
In the end, since the widespread coronavirus panic started, people withdrew their funds into fiat that they can spend on provisions. Large supplies of toilette paper, flour, meat, and other necessities cost money and can most quickly be acquired with cash. Therefore, people will remain in fiat in case of a prolonged crisis. Simply put, they will be unwilling to invest in cryptocurrencies regardless of the benefits.
While it is difficult to predict the future, it is also hard to be optimistic in a given situation. All these fundamentals are, in fact, in correlation. Therefore, if only one segment disturbs this standstill, prices may go skyrocketing as well as further down the drain.
Is the Market Crash Going to Push BTC to $1,000?
$1,000 is the price often talked about by perma-bears. However, sociologically, as the starting COVID-19 panic slowly fades, it will be more difficult to suppress the price another 80% from today’s $5,000. The cryptocurrency market crash already took more than 50% of Bitcoin’s value. Therefore, it is difficult to imagine those who remained in the game selling before they are in a healthy profit zone.
Who we shouldn’t forget about, though, are those long-term whale holders. These guys are here for ages and until they decide to start selling, BTC has a good basis for growth. However, it seems that a wallet from 2010 moved 1,000 BTC ( $68.2 then, now worth $5 million) on March 10th. This may also be a partial cause of the major sell-off as well as a dangerous pathway for others to follow.
In any case, the cryptocurrency market crash is what we are left to live with. We have to adjust. Or, even better, try to learn and benefit from it. It’s always up to an individual how he’ll deal with the existing situation.
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