Multiple factors are weighing on bitcoin’s popularity Where is the bottom of this round of pullbacks?

Deep declines in bitcoin and ethereum have driven the current round of crypto market downside and nervousness.

Multiple factors are weighing on bitcoin's popularity Where is the bottom of this round of pullbacks?

Crypto Markets Fall in Tandem
According to public data, on May 19, bitcoin fell below the $40,000 mark and ethereum fell below the $3,000 mark, while windfall sectors such as NFT, platform coins and algorithmic stabilized coins all fell by more than 10%, and the overall crypto market went down, with the market sentiment index being “extreme panic”. At the same time, the digital currency sector weakened, with Nantian Information falling over 4%, and Chutian Long, Lanke Technology, and XinKaiPu following the decline.

It is worth mentioning that the current round of bitcoin fell close to 30%. In addition, AssetDash data shows that the market capitalization ranking of ethereum fell to the 20th place of global assets, currently about 361.6 billion U.S. dollars, the market value of nearly 130 billion U.S. dollars back from the high point, and currently has fallen below the Bank of America. As previously reported, Ether’s market cap ranking rose to 14th in global assets, with a market cap of about $490.9 billion.

The deep retracement of Bitcoin and Ether has triggered panic in the market. The top 10 coins in the market capitalization ranking all showed different degrees of decline.

Multiple factors depress bitcoin’s popularity
Bitcoin fell below $40,000 per coin intraday for the first time since Feb. 8. Negative news over the past week has dampened bitcoin’s popularity. As seen at the market level, the current drop came from multiple factors.

The first was the 3-day drop in Bitcoin after Musk presented a backwards attitude towards Bitcoin on May 17. The Musk event brought about some of the variance in the on-chain data, and irrational panic discs carried out some of the selling, mainly by retail investors. In addition, the Bitcoin energy consumption issue driven by Musk has also depressed Bitcoin popularity to some extent. Recently MEP and German politician SvenGiegold also called for a law that would cap the amount of electricity consumed by bitcoin mining. He claimed that Bitcoin’s carbon footprint hurts the German economy while increasing global greenhouse gas emissions. He added that controlling cryptocurrency mining should already be on the EU’s agenda and said regulation of the crypto mining industry is “overdue.

On the 18th, the China Payment and Clearing Association, the China Banking Association and the Mutual Fund Association jointly announced that financial institutions and payment institutions are not allowed to conduct business related to virtual currencies.

On the 19th, a number of asset managers began to warn about investing in cryptocurrencies, including UBS, Pimco, T.RowePrice and Glenmede Investment Management. Among them is UBS, which said, “We expect stricter policies and regulatory controls going forward as cryptocurrencies become mainstream.” Nicholas Johnson, a portfolio manager at Pacific Investment Management, on the other hand, questioned the use of bitcoin as a hedge against inflation. In addition, Rob Sharps, president and head of investments at T. RowePrice, said, “Cryptocurrencies have an impact on capital markets as a whole, and we are capital market experts. Ultimately, the mandates we manage for our clients are not well suited to investing in cryptocurrencies, and we recognize the highly speculative nature of this space.

At the macro market level, in the near term, cryptocurrencies are likely to be heavily influenced by trends in the US equity market, bond market and inflation levels, and if the equity market enters a correction, bond prices fall and inflationary pressures increase, the cryptocurrency market will also enter a period of correction.

Multiple factors have led to increased nervousness among retail investors. In addition, cryptocurrency exchanges saw a net inflow of 30,749.89 BTC of bitcoin on Monday, the largest single-day inflow since March 12, 2020, according to data provider Glassnode. This could indicate that retail traders are looking to liquidate their bitcoin holdings in a declining market. Typically when investors want to liquidate their bitcoin holdings, they move them to exchanges, and Moskovski Capital Chief Investment Officer Lex Moskovski also tweeted that 22,917 bitcoins flowed into exchanges in a single hour yesterday. That hourly inflow was only ever seen during the crash in March 2020.

Is the market stopping and retracing or continuing downward?
In the face of the current deep pullback, analyst CarterWorth predicted in an interview with CNBCFastMoney this week that Bitcoin will hit a low of $29,000 and emphasized that the current Bitcoin price is a top support area, “If we go down 55%, we’ll be at the lower end of support.” Statistically, a 55% drop from BTC’s high would fall just below the $30,000 area. In addition, Pankaj Balani, CEO of Delta Exchange, similarly said, “Bitcoin has not bottomed out yet” and is expected to “go lower again.

Hong Hao, managing director and head of research at CBI, said in a Weibo post that the bitcoin price model chart shows where the 200-day and 1450-day averages are based on stock-to-flow inventory/production ratios, and halving events. It is estimated that this wave of sell-off will first go to 35,000 before looking at it (the line is drawn all the way to 1,000,000, and the model price run calculations so far are still interesting).

Several technical analysts on Wall Street say the worst sell-off in Bitcoin since the cryptocurrency boom started last year is set to intensify further right now, and Rich Ross of Evercore ISI thinks Bitcoin will repeat the fate of other speculative assets and will fall back to its 200-day moving average, or $40,000.

Other observers expect a “lower highs and lower lows” pattern for bitcoin and say Musk’s unpredictable tweets will discourage traditional investors. There is also speculation that gold is starting to attract money from bitcoin.

In an interview, Galaxy Digital CEO Mike Novogratz said he expects bitcoin to stay at $40,000 and rise again after a period of consolidation. Novogratz claims he is seeing more and more institutions entering the bitcoin space, adding that he is no longer a “Wall Street loner. As previously reported, Mike Novogratz has revealed that about 85% of his total assets are in cryptocurrencies.

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