Bitcoin’s current turmoil is a rarity in history.

Will there be more crazy deals like this in the future?

Bitcoin's current turmoil is a rarity in history.

After declaring a “cut” in prices from all-time highs over the weekend, bitcoin surprisingly took a double-digit percentage jump this Monday. Cryptocurrency investors have been bouncing back and forth between the sometimes plummeting and sometimes soaring waves, and many Wall Street strategists say this crazy trend may not end anytime soon.

Since its inception, the volatility of the bitcoin market has always been the “gold standard” of the largest cryptocurrency asset. However, even in historical terms, the current turmoil in bitcoin’s price is rare. Especially as it begins to be denominated in “tens of thousands” of dollars, the visual impact is magnified many times over, even if the percentage fluctuations remain the same.

For bitcoin investors who think they can handle cryptocurrency volatility, the past few weeks have certainly been the best litmus test.

Bitcoin fell heavily by 31.1% last Wednesday, the fourth-largest one-day drop for the cryptocurrency on record, according to research firm Cornerstone Macro.

The last time bitcoin saw such a big drop was back in March 2020, during the initial outbreak of the New Crown pandemic. Back then, though, bitcoin’s price hadn’t surpassed $10,000 and the public opinion generated was far from comparable to the current one.

Several other sets of data also show how “rough” it is for cryptocurrency investors right now. According to Coin Metrics, Bitcoin has experienced 14 trading days of declines so far in May alone. In addition, so far this year, bitcoin has seen 39 trading days with one-day swings of 5% or more. That’s only 42 “volatile days” in the year 2020!

Bitcoin's current turmoil is a rarity in history.

More Wild and Stormy Weather Ahead?

Many cryptocurrency strategists say that while the price of bitcoin rebounded sharply on Monday and is now back above $39,000, up more than 12% in 24 hours, more wild trading like this is ahead as regulatory pressure increases and its technical indicators release the latest signals.

Peter Berezin, chief global strategist at BCA Research, said in a report, “The hit cryptocurrencies have taken in the past two weeks is just the beginning. The cryptocurrency market will continue to face stricter regulation. In the short term, the pain in the crypto market could drag down other speculative assets such as tech stocks.”

Bitcoin’s recent volatility comes at a time of increased scrutiny by global regulators. The Federal Reserve will soon release a report outlining its research into the central bank’s digital currency space, while at the same time, Chinese authorities have vowed to crack down on illegal mining and trading of cryptocurrencies. Cryptocurrency sensation Tesla CEO Musk has also seen a 180-degree reversal in his attitude toward bitcoin recently, announcing that he will stop using bitcoin to buy Tesla cars, citing concerns about the environmental damage mining can cause.

Adam Crisafulli, founder of Vital Knowledge, said, “Bitcoin’s high volatility is still ludicrous. The economic utility of anything doesn’t change that quickly.”

Looking at bitcoin’s futures positions, analysts at JPMorgan believe the worst of this cryptocurrency correction is not yet over.

After bitcoin broke above $60,000, momentum traders scaled back their bets on bitcoin futures, leading to bearish market sentiment and inducing further unwinding of positions, the small firm noted. And while the price has now recovered to around $40,000, momentum signals, especially longer-term backwardation signals, remain problematic. It is too early to say that Bitcoin’s recent downtrend is over.”

Carter Worth, chief market technician at Cornerstone Macro, also said there are some interested shorts waiting in the wings at the $42,000 level, and that heavy pressure will make it difficult for bitcoin to rise further and break above that level. At the same time, longs that bought at the recent lows may also choose to sell if the price rises too much.

Many say investors should not be surprised if bitcoin soon suffers another sell-off and retests the lows seen since last week.

Julian Emanuel, chief equity and derivatives strategist at BTIG, noted that “there is every possibility of a retest of last week’s lows, or even a further dip, in the near term due to China’s actions against digital currency assets and the threat of U.S. regulation.” However, Emanuel also believes that any further downside volatility will provide buying opportunities. He has a year-end target level of $50,000 for bitcoin.

Posted by:CoinYuppie,Reprinted with attribution to:
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