Bitcoin, Dogecoin, Ethereum price hit hard for the second time this week
Bitcoin may have rebounded slightly after it plunged below the dreaded (USD) $30,000 threshold overnight, but analysts are warning crypto investors they are headed towards a catastrophic crash.
The world’s most prominent digital currency lost value in the night’s trading, falling from close to $33,000 to $28,814.75, CoinDesk figures show.
After declining to this point, bitcoin was trading at its lowest since January 4 — wiping out all the gains it had made this year.
The fact that it dropped below $30,000 is concerning for investors because market analysts believed it would trigger a mass sell-off and send the market into a downward spiral.
Breaking below that barrier would “basically put every long position since January 1 in the red, which I believe, will trigger another capitulation trade,” senior market analyst for Asia Pacific at Oanda wrote in a research note.
However, after suffering these losses, bitcoin bounced back, rallying more than 15 per cent to reach almost $32,627 this morning.
Other big coins have struggled though after a horrific day yesterday. As of around 6.30am this morning, ethereum took a 1.51 per cent hit, XRP dropped by 14.71 per cent and cardano lost 8.04 per cent of its value.
The bitcoin bounce back is being seen as a show of resilience by some.
Jason Lau, COO of cryptocurrency exchange OKCoin said the coin has dipped below the threshold several times and recovered.
“The $30k/BTC range has been tested and shown solid support dating back to early 2021, having been tested and bounced off multiple times now,” he said in a note.
He stressed that while temporary drops below $30,000 are not a huge cause for concern, if the digital currency trades “below $30k for a significant time,” he “will be tracking it closely.”
However, other analysts have offered far more sobering insights, and they are not pleasant reading for anybody who has skin in the game.
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Market experts at Shelly Palmer bleakly suggested the movement we’re seeing now is reminiscent of the “Black Tuesday” crash in 1929 that brought on the Great Depression.
“For anyone who invested at the top of the crypto hype cycle over the past few weeks, today is a reprise of Black Tuesday,” they said.
“By October 29, 1929, the Wall Street Crash had ended the Roaring 20s. This ‘very bad day’ in crypto is a day where the faint of heart and newbies will take a gigantic beating, while holders will welcome the buying opportunity at bargain basement prices.”
Death cross has formed
Technical data for bitcoin on Tuesday showed it had formed a “death cross”, a pattern of the token’s moving averages which would predict the beginning of a major downtrend.
A death cross appears when an asset’s short-term and long-term moving averages cross over one another, following a period where the short-term average was above the long-term. A downtrend in the average price will be confirmed if it stays that way.
Analysis from crypto research firm Quantum Economics showed bitcoin’s price had been trending upwards since October before slowing in February, causing the token’s short-term moving average to curve downwards.
“Bitcoin’s price had been trending up since October 2020, trading above the 50-day and 200-day moving averages that also sloped up in response,” said analyst Imran Yusof.
“The trend really started to change in April when bitcoin crossed below the 50-day MA,” he said, as bitcoin’s price began to swing more wildly in that time. “The token hit its all-time high of $64,829 that month, while also seeing lows of around $48,500.”
China crackdown continues
The collapse over the past two days has come as China escalated its crackdown on cryptocurrencies.
Beijing further curbed mining activity and told major payments platforms and lenders that crypto trading won’t be tolerated.
The People’s Bank of China on Monday said it summoned Alipay, the widely popular online payments platform run by Jack Ma’s Ant Group, along with five big lenders and told them to “comprehensively investigate and identify” cryptocurrency exchanges and dealers so they could cut off any crypto trading.
“Cryptocurrency trading and speculative activities … breed the risks of illegal cross-border transfers of assets and money laundering,” the central bank said.
The superpower has also moved in to shut down crypto mines within its borders.
Chinese mines power nearly 80 per cent of the global trade in cryptocurrencies despite a domestic trading ban since 2017, but in recent months several provinces have ordered mines to close as Beijing turns a sharp eye to the industry.
Authorities in the province of Sichuan ordered the closure of 26 mines last week, according to a notice widely circulated on Chinese social media and confirmed by a former bitcoin miner.
The notice reportedly instructed power companies to stop supplying electricity to all cryptocurrency mines by Sunday.
It vowed a “complete clean-up” and ordered local governments to carry out a “dragnet-style investigation” to find and shut down suspected crypto mines.
The province represents one of the largest bases for mining in the country. A former cryptocurrency miner told AFP they had “closed everything” in line with the requirements in recent days.
“There have been working groups coming to check … making sure we shut down operations and removed the machines,” he said.
Sichuan, a mountainous region in southwest China, is home to a large number of cryptocurrency mines, which require a colossal amount of energy supplied by the province’s cheap and abundant hydropower.
According to a report in the state tabloid the Global Times, the closure of mines in the province has resulted in the shutting down of more than 90 per cent of the country’s bitcoin mining capacity.
Beijing has turned the screw on cryptocurrency miners to stamp out financial risks from speculation, although environmental concerns about the gas-guzzling mines is also a factor.
Chinese media reported that electricity supply to all crypto mines across the province was stopped at midnight Sunday, as the topic trended on social media.
Sichuan is China’s second most intensive mining region after Xinjiang in the country’s northwest, according to Cambridge University’s Bitcoin Electricity Consumption Index.
All crypto mines in the sparsely populated but coal- and hydropower-rich regions of Inner Mongolia and Qinghai were also ordered to shut down in recent months, with citizens encouraged to report illegal mines.
Last month, the value of bitcoin dived after three Chinese financial industry bodies reasserted a ban on financial institutions from offering cryptocurrency services, warning against risky speculation by traders.
China is in the midst of a wide-ranging regulatory crackdown on its fintech sector, whose biggest players — including Alibaba and Tencent — have been hit with big fines after being found guilty of monopolistic practices.
– with AFP