Bitcoin Fell Over 50%: From $63,503 to $31,734 Since April 15
Is this just a dip and another buying opportunity or the beginning of the cryptocurrency’s apocalypse? While Bitcoin zealots predict Bitcoin will soar to $120,000, bearish analysts insist that the recent low of just over $30,000 interlay is a sign Bitcoin is heading back to $20,000, even $10,000.
Bitcoin has rebounded $4,528.00 today, a paltry profit compared to the drop of $31,739 since April 15.
The threat of stiffer government regulation by the IRS and banking authorities here in the United States and around the world, including China, is causing a new round of price jitters and, yes, a significant decline in the value of the most popular cryptocurrency in the world; Bitcoin.
The pressure to the downside has come from Chinese Vice Premier Liu. In a statement made by Liu, he made it clear that Chinese financial authorities intend to “crackdown on Bitcoin mining and trading behavior,” among other measures, to help promote financial and economic stability.
This comes after U.S. authorities have also made it clear they intend to tighten rules as part of a broader initiative to raise more Federal tax revenue.
The Treasury Department proposed new rules on Thursday, including requirements that crypto transfers to businesses be reported to the IRS if the value is over $10,000. New reporting requirements would also cover foreign financial companies, exchanges, and custodians. This amounts to a kick in the Bank accounts for cryptocurrencies across the board because of the billions of dollars in tax avoidance that has been taking place.
DataTrek Research pointed out in a note earlier today that the total market value of Bitcoin ranged from about $3 billion to $10 billion despite soaring in value to $1 trillion in April—before the ongoing bust. Yet, Bitcoin’s volatility hasn’t budged, averaging daily price moves of 3.7%. The decline has been until recent days steady and orderly.
For context, according to DataTrek, the trade-weighted dollar moves an average of 0.3% a day, making Bitcoin about 13 times more volatile. DataTrek co-founder Nicholas Colas wrote, referring to Bitcoin’s current market value.
“If you are involved, we recommend a position size that acknowledges this is a $750 billion asset that still trades like it is a $1 billion asset.”
Stock analysts point out that usually, the bigger a stock becomes, the less volatile it becomes. Spiking volatility is often a sell signal, one that shows investors are losing faith in a company’s prospects.
Eli Musk’s attack on Bitcoin late last week and his suspension of accepting Bitcoin for payment for Tesla auto and truck purchases have helped accelerate the more than 40% sell-off we’ve seen in the last two months. One of the most significant issues facing Bitcoin is its market value is deceptive.
According to Deutsche Bank’s latest numbers, approximately 78% of the total Bitcoin supply, 18.7 million coins, is illiquid—held off exchanges in digital wallets or went into escrow for borrowing or lending. Less than $1 billion of Bitcoin changes hands daily.
By comparison, JPMorgan Chase (NYSE:JPM) has a market cap of $486 billion and 15 million shares trading daily. Its average volume in recent weeks has amounted to $2.4 billion daily. According to the latest numbers reported by Deutsche Bank, compared to gold, which is often cited as an alternative asset to Bitcoin, its daily volume is paltry, amounting to just 1.9% of the precious metal.
While trading in Bitcoin doesn’t amount to much volume, the broader derivatives market is far larger and may also be amplifying the volatility.
Going back to Elon Musk’s criticism and his abandonment of Bitcoin, he souring on Bitcoin is driven as he sees the environmental toll that mining the cryptocurrency is taken mine.
According to Musk, since the computer network runs partly on cheap fossil fuels. Some U.S. companies are now buying old coal-fired plants and putting them back into service for crypto mining, as the Wall Street Journal reported.
The prospect of a Bitcoin carbon tax isn’t out of the realm as governments look to cut the carbon footprints of their economies since mining the stuff now consumes as much electricity as countries like Argentina.
One analyst Clem Chambers the CEO of global stocks, shares and crypto information website ADVFN.com and author of Amazon No.1 Bestseller 101 Ways to Pick Stock Market Winners and Trading Cryptocurrencies: A Beginner’s Guide, is seeing the end of the current bullish Bitcoin four-year cycle.
Pointing to a simple price chart showing 2017 through May of 2021, the current Bitcoin crash underway would is near a carbon copy of the 2018 crash the crypto current experienced. According to Chambers, this new nose-dive suggests a big descent, but circumstances are different from the ‘Great Crypto Crash.’
”The next crypto winter will be as long as the last and the coming boom will be twice as high as this one.” So he’s predicting a bigger crash to perhaps as low as $20,000, even $10,000 for bitcoins and then a new bigger rally.
There was renewed interest from both bulls and market players, including billionaire Mark Cuban, who came out with a bullish statement about the recent cryptocurrency downturn, referencing excess leverage and the alternate coins and tokens that have been associated with bitcoin.
By the Numbers: Cryptocurrency crash