Bitcoin drops below $30,000 for the first time since January. Here’s why…
Following the broad crypto crackdown from China, Bitcoin dropped below $30,000 for the first time since January before it recovered some of the losses on Tuesday.
The cryptocurrency, which dropped below the $30,000 level for the first time since January, has lost more than half from its mid-April high of about $65,000. Bitcoin started 2021 at around $29,000 after a fourfold increase in 2020.
This kind of dip shows that Bitcoin traders could get entangled in a choppy market for weeks.
On Tuesday, Bitcoin dropped by 12% to $28,824 (a little below last year’s $28,997 closing price). However, it recovered and traded down 3.2% as of 11:45 am in New York.
Bitcoin may find it difficult to find support in the $20,000 range after dropping below $30,000. Before Tuesday, the crypto went below $30,000 at least 5 times this year but bounced back to trade above that level every time.
According to Matt Maley, the Chief Market Strategist for Miller Tabak & Co., “Any meaningful break below $30,000 is going to make a lot of momentum players throw in the towel. Therefore, even if Bitcoin is going to change the world over the long-term, it does not mean it cannot fall back into the teens over the short-term.”
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This is a remarkable trend for the coin that was moving higher a few weeks ago after being embraced by Wall Street and retail investors. However, negative press about the digital asset, caused majorly by Elon Musk, and the clampdown from China have been responsible for its downward trend in recent weeks.
The recent clampdown from China occurred on Monday when the country’s central bank stated that it had directed officials from the biggest lenders and AliPay to effect a ban on cryptocurrency services. Chinese officials are doing all they can to get rid of cryptocurrency mining operations.
According to Nick Mancini, a Research Analyst at Trade The Chain (a cryptocurrency sentiment analytics provider), “Bitcoin’s continued sell-off has contributed to a negative outlook by traders driven by bearish news out of China. The mood among traders is now continuing to sour.”
The $30,000 level for Bitcoin held steady during a selloff that occurred last month (an event that wiped out about 35% in May). However, a fall in Ether pushed it towards its support level of $1,500. If it breaches that level, Ether may also continue to experience a selloff.
Excessive rallies, as well as drawdowns, are not new for Bitcoin and other cryptocurrencies. Bitcoin experienced a renaissance in 2017 where it increased by over 1000% the same year and lost about 75% the next year. Last year, it increased by 300%.
Shedding more light on this, Eric Diton, the President and Managing Director of The Wealth Alliance, stated that “The most speculative part of the market is cryptocurrency. At the end of the day, what determines the value of Bitcoin is acceptance and more demand and supply. When you have a country like China come out against Bitcoin, that hurts its global acceptance and that’s why you’re seeing the value deteriorate as much as it has.”
