Market Update: Bitcoin Crashed, Should I Be Concerned?
The crypto market cap dropped $1 trillion in one day. Here's why that's not a cause for panic.
A Volatile Market
FirstWatch Crypto is in Miami getting ready for the Bitcoin 2021 Conference, the world's largest Bitcoin conference! Follow our team on Twitter @blaizebitcoin and @d_mcglinn for live updates.
On Wednesday, May 19th, the wild sea that is the crypto market revealed choppy waters and strange tides. It marked the beginning of Bitcoin's 51% drop in one month, falling to slightly above $30k. Many traders and funds quickly bought the dip, but the broader sell-off has left Bitcoin down about 40% from its all-time high.
The crash was preempted by a variety of negative news at once, as well as a seven-month market run-up that saw Bitcoin rise 6x.
The negative news came from three sources:
China jumped on the FUD (fear, uncertainty, doubt) train, and made formal announcements that would destabilize the country's crypto economy. Chinese miners quickly began mobilizing their operations looking for new homes abroad.
Elon Musk, commenting on Bitcoin's energy usage.
The first two sources of negative news created a sell-off that was accelerated by risky leveraged traders getting margin-called.
Since the crash, the price has become relatively stable. An equilibrium price "stabilized" around a 5-day price average $38k, with a trading volume in line with its 200-day average.
Being invested in cryptos seems risky, but is it over the long term?
Why This Cycle is the Same (But Different).
As we've discussed, Bitcoin's supply is fixed, and actually deflationary. What isn't predictable in this market is demand.
Bitcoin has matured and brought on institutional investors from public, private, and governmental sectors. This website shows a complete list of Bitcoin Treasuries that consistently grows. As the adoption phase continues, Bitcoin will remain a volatile asset with many sell-offs. However, leading analysts taking a long-term view have modeled Bitcoin's unique supply and demand dynamics, positioning us in the midst of a bull run, with "baby bubbles" and "mini crashes".
The chart below compares Bitcoin's price appreciation on a percentage basis to its 2017 bubble. As Mark Twain said, history doesn't repeat itself, but it usually rhymes. If Bitcoin continues to track similar to its 2017 trajectory, we are in the midst of a mini-crash within a long-term growth phase.
It's possible we will see more 20-30% pullbacks on the journey to seeing new highs. But to ease your anxiety, Cathie Wood, tech investing guru, said that "Bitcoin could rise to somewhere in the $400,000 to $500,000 range”.
Some key stats:
The May 2021 crash is only the 6th largest pullback by percentage in Bitcoin's history.
Bitcoin is still up 31.47% YTD and almost 300% over the last calendar year.
In a PwC survey, 1 of 5 cryptocurrency hedge funds predicted that the year-end price would be between $100,000 and $150,000.
The Bitcoin Fear and Greed Index has switched from Greed to Extreme Fear in just the last month.
Resources:
Slower institutional demand has been a common theme after the dip.
Robert Kiyosaki, famous "Rich Dad Poor Dad" investor, is pleased to see the dip.
Billionaire Carl Icahn Eyes Potential $1.5B Crypto Investment
Bitcoin 2021
FirstWatch Crypto is currently in Miami getting ready for the Bitcoin 2021 Conference, the world's largest Bitcoin conference!
Follow our team on Twitter @blaizebitcoin and @d_mcglinn for live updates from some of the world's most prominent crypto voices.
FirstWatch Crypto
What We Do
Every ship needs people keeping watch. The tireless observers constantly on duty and essential to the ship's safety. FirstWatch Crypto is inspired by this constant vigilance. We are braving the waters together, helping guide your investments through the complex sea of change of cryptocurrencies. These financial technologies have changed the tides of finance, and are leading us to a new world. FirstWatch Crypto brings knowledge and passion for the future of finance and cryptocurrencies. We want to help you achieve a better future by making crypto understandable and accessible for you. We will keep the first watch.
Who We Are
John "Bitcoin Blaize" Hrabrick (@blaizebitcoin) and Dan McGlinn (@d_mcglinn) are graduates of the University of Notre Dame. They are based in Philadelphia and are both excited about the possibilities that cryptocurrencies bring and write to get others financially and philosophically into the crypto space.
Disclaimer: None of the above is investment advice. This blog is published for entertainment and informational purposes only. The ideas expressed are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. Nothing on this blog constitutes investment advice, performance data, or any recommendation that any security, portfolio of securities, investment product, transaction, or investment strategy is suitable for any specific person. You should not use this blog to make financial decisions. We highly recommended you seek professional advice from someone who is authorized to provide investment advice. You should always do your own research before investing in cryptocurrencies. It is a volatile market.