Prices are falling and tumbling and the rebound that started just over a month ago is turning out to be hot air. How bad is it really? Which coins suffer more, which less? Was that the final sell-off that led to the bottom? And if not - what could indicate this then? We try to answer such questions at least roughly.
I hope you had a nice weekend. Because the new week is not exactly starting off brilliantly for us bitcoin and crypto investors. The stock exchanges are selling as much as they can and prices are plunging to new local lows.
To be more precise: A bitcoin cost a good 34,000 euros on Saturday and is now traded for almost 32,000 euros. Bitcon has lost around 7-8 percent. Ethereum fell even more, from a good 2,500 to 2,300 euros, i.e. by almost 10 percent. Almost all other coins fared similarly.
The market had an appetite for falling prices, the bears are raging.
Unpleasant facts in many pictures
Tonight's plunge capped a month in which bitcoin price first lurched on a mild downtrend, only to tumble down a slope starting May 5th. Since that day, Bitcoin has lost almost 5,000 euros or around 15 percent.
The Bitcoin price in euros in the 1-month chart according to Bitcoin.de
Doesn't look friendly, does it? Unfortunately, this image persists for a relatively long time as we zoom out further. Roughly on the 1-year chart:
As you can see, it's been quite a while since you've been able to buy bitcoin at such a cheap price. Depending on the exchange, there was a brief moment in February when Bitcoin was cheaper, but the price was last permanently lower in July 2021. We are close to a 1-year low. In order to crack this mark, the price would have to drop to just under 27,000 euros, i.e. by almost 20 percent.
Ethereum presents the same rather frustrating sight. By and large, Etheruem follows the course of Bitcoin.
Ether price in euros in the 1-year chart according to bitcoin.de
Again in February we have a brief moment when an ether was cheaper. In order to find permanently lower prices, we have to go back to July 2021 here too. But in order to crack this low, ether would have to fall much more than bitcoin, namely by around 600 euros to a good 1,500 euros, which corresponds to more than 20 percent at the current price of a good 2,250 euros.
The situation is similar for other coins as well. Often even worse. For example, Cardano , one of the most popular alleged Ethereum killers, has even plunged to a 14-month low. Only those who bought in February 2021 are a little in the plus here.
The Cardano price in dollars over time according to Coinmarketcap.com
This price trajectory is an almost idealized "shitcoin chart": a short, explosive breakout to the upside that ignites a lot of excitement is followed by a long, sluggish period of disillusionment, in which prices fall and fall and fall step by step, until the last spark of enthusiasm is gone...
But Cardano isn't the only coin that's about to have largely phased out the big bubble that's been sweeping us since 2021. Dogecoin has also partially collapsed the memecoin bubble that started in April 2021.
Bitcoin Cash (BCH), on the other hand, participated in the 2021 bubble relatively unmotivated and has now fallen back to the end of 2020 price.
Bitcoin SV looks even more common. Here you have to look back to 2019 to find comparably weak prices:
The only notable exception I found is the privacy coin Monero . It is also falling with everything else in the last 20 days, but was worth significantly less this February:
Overall, we have a market that is bleeding profusely for those who entered at the top of the bubble. If you did that and have been holding on with desperate hope ever since, I'm very sorry. The following chart from Blockchaincenter shows how much the coins have lost from the top:
Among the coins that we know of, Dash, Bitcoin Cash, IOTA, EOS, Compound, Zcash, BSV, Uniswap, Ripple, Pancaceswap, Dogecoin and Fantom are the ones that have lost the most.
No trend reversal visible in the charts
It is unmistakable at this point that the large bubble that built up in 2020 and 2021 has largely dissipated. If a coin has already lost 90 percent of its value, things can get worse, but the worst part of the pain is over.
Are there any indications as to whether this is already the case? Have the bears raged enough? Have we hit the bottom yet? Can the price stabilize a bit here and eventually rise again? And if not - how long will it take?
Answers to such questions are naturally difficult to find. Markets are psychology. They do not obey hard logic, but rather the whim of collectives. As a rule, you "feel" it when the price hits the bottom, but this "feeling" is based on a variety of factors that you usually perceive and piece together consciously or unconsciously. I "think" that we're not there yet.
The only reasonably hard indicator of bottoming is trading volume. As a rule, a high, either gently rising or explosively high-speed trading volume accompanies a trend change. It is at these moments that one part of the market sells in a wild panic because all the gates of hell now seem open, while the other part stuffs its pockets with cool consideration.
Thus, the price briefly falls to a particularly low level, well below the bottom, where it triggers the bulls, and then bounces back up. Such an event is usually accompanied by a massive increase in trading volume.
So far nothing has been seen of this. But on the contrary. The trading volume is almost indifferent to the fall in price, as shown by the volume of all exchanges according to Coinmarketcap:
Do you see? Or: Don't you see? Trading volume is pretty dull at around $100 million a day and has tended to decline since fall 2021. Even the fall of the last three weeks, yes, even the fall over the weekend, has little impact. The bears play and the bulls keep sleeping; new lows have not yet triggered any new buying waves.
This is confirmed by a look at the Bitcoin trading volume at Bitcoin.de. It remains at a relatively low level.
The decentralized Uniswap exchange has not seen any particular jumps in volume either. This is what the 1-year volume chart on uniswap.info shows :
If volume analysis matters, then the bear market of falling prices may not be over yet. Unfortunately.
Important events?
So the good news is that much of the bubble that has built up in 2021 has already dissipated. But the bad news is that there's still room to go down.
Only — how far? And can this be linked to events? Are there events that triggered the price decline? Are there events that can initiate another collapse?
As always, this is difficult with crypto markets. A market is collective psychology, and in part this makes charts self-fulfilling prophecies: if a chart looks like it's about to go lower, as in the chart image of the dead cat falling down the stairs (which almost ideal-typically drives the depletion of the bubble in Cardano), then it does That alone can be reason enough for it to happen.
Still, we have a few ideas on how to connect charts and the "real world":
For one thing, the US Federal Reserve recently raised interest rates by 0.5 percent, which central bank chief Jerome Powell wants to use to combat inflation. Although interest rates are still moderate at 0.75 to 1 percent, this alone makes secure investments such as bonds or savings accounts or money market accounts attractive again. This is likely to prompt portfolio managers to reallocate capital from riskier to less risky classes, potentially draining capital from crypto markets.
The ECB is sticking to the low interest rates so far. However, markets may expect the ECB to follow the Fed sooner or later.
In Latin America, meanwhile, things are not looking too rosy for the bitcoin nation of El Salvador. President Nayib Bukele is likely to be deep in the red with his investments, bitcoin bonds are delayed until the end of the day, and the president may have little time to attend to volcanic mining or Bitcoin City while dealing with gang riots and a has to contend with the threat of national bankruptcy. The failure of El Salvador's bitcoin policy could send a strongly discouraging signal to the markets.
Michael Saylor's MicroStrategy is also slowly coming under water. While MicroStrategy's bitcoin investment should remain reasonably positive, the last few purchases of "the dip" have been more of a non-starter that didn't turn a profit or help stabilize prices. The fact that Saylor does not post with every dip as usual with how many coins his company has bought could be telling. A cascade of unpleasant effects threaten, in the course of which the company will be forced to sell bitcoins, causing the price to continue falling, and so on.
These are just a few examples. Another would be the $3 billion that the Luna Foundation is using to buy or has bought bitcoins to support the stablecoin UST. Even this massive purchase couldn't stop the price fall. The downtrend seems to be quite strong.
At the same time, the DeFi and NFT hypes are slowly coming to an end. Enthusiasm is waning, monetization opportunities are thinning, DeFi and NFT-related tokens are among the big losers, and new hypes are nowhere in sight. The brief burgeoning hype surrounding gaming NFTs seems to have ended before it even started, and a new trend to entice new buyers doesn't appear to be on the horizon.
The bitter pill
It is sometimes said that bitter medicine heals well, and crypto markets like to say that it has to get worse before it gets better. Only when the price hits a bottom with a bang, only when it goes so low that whales suicidally wash themselves ashore, that startups go bankrupt and shitcoins lose not just 90 but 99.9 percent of their value, only when they do die-hard Bitcoin maximalists doubt, if not despair - then the time has come. Then one can speak of a "bottom" and from there things can go up again.
In other words, let MicroStrategy and El Salvador, the two big symbols of the 2021 bubble, go bankrupt, let DeFi tokens fall back to zero and memecoins like Dogecoin or Shiba Inu sink deep into oblivion. Then we can talk about how to proceed.
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