On May 26, bitcoin again failed to overcome an important resistance level of $40,000, after which its price fell to $37,000. The cryptocurrency continues to recover after first its quotes fell by a third to $30,000 on May 19, then rose above $42,000 and again fell to $31,000 on May 23.
Bitcoin fell last week amid a statement by the Chinese authorities. Vice Premier of the State Council of China Liu He called for stricter regulation of mining and crypto-trading in the country. The market collapsed despite the fact that the government did not even offer specific measures to impact the cryptocurrency industry.
The government then reiterated its tough stance on cryptocurrencies in an article titled “Urgently eliminate hype and chaos around virtual currencies,” published by Xinhua news agency. After that, miners began to leave China and trading platforms began to suspend services to customers from that country.
The negative impact on the market is already built into the price, in fact, the entire current so-called “cryptogedon” is related to it. Similar bans have happened in China many times before, but all of them had only a temporary negative impact. Accordingly, we are not talking about the long term.
However, the negative background was supported not only by the news from the Celestial Empire. Elon Musk added reasons to sell cryptocurrency after he criticized bitcoin and Tesla refused to sell its products for it.
To be fair, at the time the quotes collapsed, Musk expressed support for the cryptocurrency community by posting a post titled “Tesla Has Diamond Hands.” It was a hint that the company was not selling its bitcoins. And then the billionaire reported that he held a meeting with North American miners to discuss the use of renewable energy sources.
Overall, even now, the situation in the global economy and the crypto market points to continued growth. Without these bans, it is likely that the market would have continued to grow after a slight correction. In the near future, growth of 50-70% from the current marks is possible, given the outflow of bitcoins and ethers from exchanges, “free” in the market stabelcoins, as well as the very low value of the top cryptocurrencies in the current growth cycle.
After bitcoin collapsed to $30,000, the largest outflow of bitcoins from cryptocurrency exchanges since last year occurred. In 24 hours, 175 thousand bitcoins worth about $7 billion were withdrawn from trading platforms. It also became known that the main buyers of the cryptocurrency during the fall were large investment funds.
According to Glassnode service, the lion’s share of bitcoins sold during the current fall were bought in the last 3-6 months. This suggests that it was mostly newcomers to the market who were selling. Not big investors, but retailers who planned to make a lot of money during the current growth cycle. However, the situation in China and Musk’s imprudent statements scared them and caused panic sales. As a result, the price very impulsively sagged.
I still stick to the scenario that bitcoin will reach $80-85 thousand by the end of the year. The current fall, as I think, will only accelerate the price, as it was after the March 2020 collapse.
Much will become known after the June meeting of the U.S. Federal Reserve which will either announce the beginning of the rollback of QE (quantitative easing), as well as other stimulus instruments, or not.
If it is announced, all risky assets will temporarily go down in value. However it seems to me that the Fed understands that it is not the right time to make a collapse in markets, so the stimulus rollback will be postponed and the cryptocurrency will grow and return to the highs as a result.