After the longest (and most profitable) bull run in its 10-year history, Bitcoin (BTC) is broke below the $30,000 mark for the third time since the beginning of the year. While Elon Musk has fueled the recent bearish sentiment, his persistence comes from a host of market dynamics, including last week's stock market selloff.
Bitcoin fell 6% to $29,600 on Tuesday. That's only slightly more than the $29,022 bitcoin started 2021 at, and more than 50% from its high of over $64,000 in mid-April.
Three Times BTC Dropped Below $ 30,000 Since Q1 2021 | Source: BTC / USDT
Although the exact reason for the decline is not known, crypto markets in other markets are showing sharp declines. That includes the Dow Jones Industrial Average, which posted its biggest one-day drop since October. Analysts suggest that the stock against BlockFi on Monday night by the New Jersey Attorney General's Office may also have raised concerns of a broader approach by regulators, leading to tougher regulations. Previous regulatory actions have led to massive sell-offs.
However, the largest cryptocurrency reversed course to bulls early on Monday, June 26.
Tuesday's drop below $ 30,000 was short-lived – in less than 24 hours, BTC broke and traded above the $ 30,000 mark. Contrary to what some observers expected, however, it did not trigger a major selloff. Over $ 38,300 traded as of this post.
Current price of BTC below the level of $ 30,000 | Source: BTC / USDT
The current bounce shows that the drop below $30,000 is not due to the market selling, but to market sentiment. Although most investors are cautiously optimistic, it is clear that BTC is losing its haven status.
Unlike the bear run that started in May, yesterday's ricochet shows that Bitcoin is also under pressure after a sell-off in the stock markets shows one thing. In practice, cryptocurrencies are still not perceived by most investors, at least for now, as an asset that serves as a "safe haven" during a downturn in market sentiment.
The recent deterioration in stock market sentiment in Europe and Asia also weighed on risk assets, including Bitcoin and cryptocurrencies. Moreover, major central banks such as the European Central Bank ( ECB ) are stepping up their efforts to keep up with the race for new digital currencies.
Typically, safe haven status has always been reserved for gold, bonds or some currencies like the JPY. The recent trend in BTC mirrors that of riskier assets such as stocks.
For most of the year, Bitcoin has faced major hurdles, especially in terms of regulation. China, Europe and the US have imposed heavy regulatory controls on cryptocurrency. This, combined with concerns about the energy required for mining, has made even hardcore crypto enthusiasts wary of the asset, with some like Elon Musk suggesting that the only way out of the current rut is to switch to renewable energy.
The price of Bitcoin is roughly where it has been since the beginning of the year. At the current level, the dollar price of Bitcoin is already roughly where it was at the beginning of the year – it ended 2020 at around $29,000. However, if you go back a full year – to July 2020 – the price has more than tripled. In mid-July of the previous year, the price of Bitcoin stood at about $9,400; this represents over 307% annual profit.
YOY Growth in Bitcoin Value | Source: BTC / USDT
The MA death crosses between the 200-day MA and the 50-day MA on June 18 were soon followed by the dip below the $ 30,000 on June 22. Since then, BTC has struggled to regain its footing, holding steady below the 50-day MA until July 24, 2021.
Applying Fib Retracements in Bitcoin Price | Source: BTC / USDT
Given the persistent support at $ 29,000, BTC broke above the 50-period MA and reached $ 38,150, right at the 0.236 Fibonacci retracement level. From here, if the price resumes its downward movement, we can expect it to move in a channel between $30,000 and $36,000.
A break above $40,000 will meet resistance around $43,000 near the 0.382 Fibonacci retracement level in the medium term. Note that this is the level last seen on June 18, when the 50-day MA fell below the 100-day MA A successful break above this level could successfully push BTC north of 46,000 $ in the medium term.
What should I expect?
BTC's recovery could come mostly from positive comments from Elon Musk, Jack Dorsey and Cathy Wood. Elon Musk reveals Tesla and SpaceX own Bitcoin, Cathie Wood encourages corporations to add BTC to their balance sheets, and Jack Dorsey says it's sustainable.
Anyway, we all know that a day's price action does not equal a trend when it comes to crypto. Consider that we are still in one of the worst crypto bear markets, where approx $1.3 trillion has been wiped out from the market since May.
In the long term, we expect Bitcoin's price action to be shaped by regulations in China, India, the US and Europe.