Here’s Why Bitcoin Crashing to Tesla’s Buy Level & Ether to $2,440 Signals A Maturing Crypto Market
The crypto market is in free fall; bitcoin crashed 44.3% to $36,200 and Ether 45% in a bloody red market. Still, some coins like DeFi showed signs of quick reversal, signaling a maturing of the market only to get wiped out today.
The cryptocurrency market is in deep-red this week.
Last week, the market started to see corrections which intensified this past weekend only to continue seeing the price of Bitcoin crashing to $36,200 on Coinbase. It has been around this level since Tesla had announced in February that it had invested $1.5 billion in Bitcoin.
As we reported, the market hadn’t ruled out $38,000 at all, and that’s exactly what happened. While currently BTC/USD is trading above $40k, it’s to be seen if we are done with the pullback or more pain is to come.
The worst-case scenario for Bitcoin currently is $33,000-$28,000.
$BTC: 200-day MA on test right now. pic.twitter.com/eJRlQBp6NB
— David Puell (@kenoshaking) May 19, 2021
With the latest correction, the price of BTC is down about 44.3%. While this may seem like the beginning of a bear market, what's worth noting here is that this is the first such deep correction of the current bull market, unlike the 2017 one where we have had nine pullbacks in the 30-40% range.
For now, things seem to be in the realm of what the market has seen before, and historically holding strongly to your cryptos at this stage of panic has resulted in profits as price rallies back to new all-time highs.
Don't miss the forest for the trees. A 40% drawdown in a bull market, regardless of news, regardless of how bad it looks, has empirically showed absurd profit if held. pic.twitter.com/gPQv8heahQ
— light (@lightcrypto) May 19, 2021
When it comes to ETH, the cryptocurrency went under $3k to hit $2,440 last seen on April 27th, not even a month back, representing over a 45% drop from its ATH of $4,380 less than a week back.
Now, talking about what has caused this massive sell-off, we can always point to the China banning Bitcoin FUD; Elon Musk made some uneducated claims about Bitcoin’s “insane” energy usage or a number of things. They surely played their part because if the market had been strong, it would have shrugged these headlines but instead end up reacting to them negatively.
From mid June to mid July 2017, $BTC lost 37% of value then went on to do a 10x over the next 5 months.$BTC has lost about 38% of value since its mid April peak of $64,850.
— SpartanBlack (@SpartanBlack_1) May 19, 2021
This makes sense given that the market has been pretty euphoric and parabolic-like ever since the March 2020 crash. After such violent movies, decent pullbacks are expected, which provide the market good support to continue further.
Meanwhile, some market participants believe the extensive drawdown in Bitcoin prices is the result of the Bitcoin market being fearful due to losing momentum and increased worry about a flippening.
If you don't believe in decoupling, it's nbd as the market will show you shortly anyway
— Zhu Su (@zhusu) May 19, 2021
“Market is testing going off the Bitcoin standard. Historically, BTC has dictated overall crypto inflows/outflows, but if we can see sustained inflows into ETH and other protocols in spite of BTC weakness, then the flippening of ETH is very much in play IMHO,” said Santiago Santos, general partner at ParaFi Capital.
However, initially, Ether had a suppressed reaction to this violent price action only to fall prey to it on Wednesday.
A relationship between new paradigm, super cycle, flippening and shitcoin hysteria.
Peak euphoria, when the market thinks "Bitcoin is old", gets healthily crushed.
Chart: google searches for "flippening" pic.twitter.com/X8Fh0EF3Cz
— Charles Edwards (@caprioleio) May 19, 2021
What’s interesting about the current market is the divergence in different crypto assets. While BTC and ETH went down like crazy, several coins just didn’t care much and had been rallying, notwithstanding the panic in the market.
MATIC is the biggest example of that, which had a very quick reversal and went back towards its ATH. This native token of layer 2 solution Polygon is up a whopping 13,562.32% YTD. Polygon base Quickswap’s QUICK has also been up 20% in the currently red market.
SOL is another big example of this, which has always shown strength during such times. Much like MATIC, in the last 24 hours, SOL went on to hit new ATH at nearly $58.50 to drop to $44.31 today, only to be back at $50.
Fundamentally speaking, productive assets with completely different attributes shouldn't have the same market cycle as unproductive assets anyway.
Tech stocks went on a 10 years+ structural bull market while Gold remain sideways and stagnant is perfect testament of that.
— Arthur (@Arthur_0x) May 19, 2021
Basically, all the DeFi coins like AAVE and SUSHI have recovered fast from their crash beautifully, signaling the latest DeFi summer. Unlike the broad crypto market, which is down between 3%-30%, DeFi coins are majorly in red by 5%-15%.
And this is the sign of market maturation.
“A great number of crypto assets have been going up since the Tesla “not accepting more bitcoin” announcement. Some of them sharply,” noted trader and economist Alex Kruger. “This is a sign of maturity within crypto markets, and not what a bear market looks like.”
In a not so distant future people will no longer talk about the “crypto bear market”, but the “BTC bear market”, the “ETH bear market”, the “DeFi bear market”.
People will realize that crypto-SoVs, crypto-commodities, and crypto-equities don’t have to move together.
— Qiao Wang (@QwQiao) May 19, 2021
New flows are coming into the market for DeFi and ETH, also noted Avi Sanyal, Head of Trading at BlockTower. People, according to him, are rotating their BTC profits into higher risk and higher reward assets.
“It’s an evolution of the Blockchain v Bitcoin meme,” he added.