There is nobody who likes to see others get rich as they lose or they stand watching. Whenever it happens, investors seem to join the bullish market which results in the formation of investment bubbles. Money rushes into the sector playing catch-up, seeking some piece of the action.
Bitcoin is down massively, breaking $40,000 in the early trading hours of May 19. It is now the tenth daily drop in the last two weeks of trading. The crypto was nearly 50% down from its all-time highs.
There are several reasons for the recent weakness. China banned the use of cryptos for all financial institutions in its jurisdiction. Other nations might be considering tightening their regulation, mainly as cryptocurrencies become the currency of choice for ransomware hackers. Tesla stopped accepting Bitcoin as a method of payment for its vehicles.
But things go down sometimes because they are going down. The investors that bought early are seeking to lock gains, while recent arrivals to the cryptocurrency game are panicking with selling begetting selling.
When the stock bubbles pop, the selling normally stops when the shares drop below its intrinsic value and become quite attractive to a new value class of value investors that did not partake in the market froth. Cryptos are different, they do not have intrinsic value, meaning that there is no telling when the selling will stop.
Is This Worse Than The March 2021 Dive?
Bitcoin (BTC) lost $8,000 in hours today as the hodlers saw a return of levels that have not been seen since the start of February 2021. A critical level comes up as Bitcoin challenges long-term support lines and deals a massive blow to the long positions.
Data acquired from TradingView showed BTC/USD plummeting to new lows of $32,200 on May 19. The selling pressure is considerably high and it kept coming as allegations of more Chinese crackdown adding onto a stocks rout and a strengthening United States dollar.
In what is known by some as a “capitulation bottom,” BTC failed to hold $40,000 support and started a short freefall below its critical 200-day moving average. While the drop in dollar terms was average by BTC’s standards, it resulted in mayhem among the speculative traders, with one hour seeing $2.7 billion of liquidations. The total liquidations in the last 24 hours stood at $6.5 billion.
The founder of analytics resource LookIntoBitcoin, Philip Swift, tweeted alongside a chart:
“Long leveraged traders liquidation spike on that move down in the past hour.”
The co-founder of fellow analysis resource Glassnode, Rafael Schultze-Kraft, added that the short-term bitcoin investors were currently at a loss and the current prices represented a line in the sand for the BTC market.
He mentioned Glassnode’s Short Term Holder MVRV indicator that reviews the price of unspent transaction outputs 155 days old or less. He commented:
“Short-term holders now underwater, as STH-MVRV drops below the neutral line. Key level.”
Altcoins Follow The Drop
At the time of publication, Bitcoin was trying to cement a floor above $37K amid uncertain conditions. In the case of altcoins, the picture was also grim, with most of the major cap tokens losing almost 30% on the day.
Among the largest plunges were Shiba Inu (SHIB) and Telcoin (TEL), both of which had gained massively in the past. Ether (ETH) dropped below $2,000 briefly but it has since recovered. A silver lining for the Bitcoin bulls was its market cap dominance that surged from below 40% to about 45%.