Cryptocurrency enthusiasts woke up to the bitter news that Bitcoin dropped below $32,000. Most cryptocurrencies also were seen crashing lower than their respective support areas. Today, the market lost more than 7% on an aggregate level. This has been happening for days now. Why is Bitcoin down? Why are most cryptocurrencies in the red? Let’s analyze what is currently happening!
Is Bitcoin Crashing?
The obvious answer is yes. Bitcoin lost more than 30% in the past month alone. This happened after reaching the support price of $48,000. Bitcoin could not break this support and had to retrace lower towards the support price of $33,000. However, the reason for this crypto panic is that Bitcoin did not retrace higher, and continued lower. The current price of Bitcoin is close to $31,000. If the trend continues, the next target price for Bitcoin would be $28,800.
In figure 1 above, we can clearly see those retracements from the $48,000 resistance towards the lower buy zone delimited between $28,800 and $30,200.
Why are Cryptocurrencies down today?
There are many reasons why the crypto market is down. Let’s ist them one by one:
- Correlation with Legacy Markets: The equity market is crashing and is deeply in the red. The recent correlation in prices between cryptos and equities started to show towards the beginning of 2020. As the equity market is crashing, cryptos started to crash at the same time.
- Cryptos are adjusting: Looking back to figure 1, we can see how cryptocurrencies appreciated in value within 2 years in a very fast way. We did not see any significant breather that offsets this increase.
- Warren Buffet bashes cryptos: Recently, Warren Buffet went to the mainstream media and bashed Bitcoin, saying it has “no real value”.
- Little to no new developments in the crypto space: The problem with cryptocurrencies is that currently, every time there’s good news, the buying power comes into the market. When there is no news, the market becomes stagnant. This is what’s happening right now. This leads us to the last point:
- Snowball effect of selling cryptos: When the market was already stagnant, and the negative sentiment comes in, people start to sell. With the absence of good news, prices go down, people panic, sell more, prices go down, people panic…it’s a vicious cycle!
Will Bitcoin reach 0$?
Most probably not. Blockchain technology is here to stay. Crypto investors should look at the underlying technology behind the token they are buying. If it makes sense in the real world, it won’t go anywhere anytime soon. Blockchain technology is being used in many big tech firms and helping thousands of companies automate their businesses while increasing security.
Additionally, there are many advocates for a decentralized world. This technology helps people, companies, countries, and governments. Now of course, Bitcoin is not directly related to using blockchain. Users can use blockchain outside of Bitcoin, but today, Bitcoin still has a significant dominance of more than 40% of the market. If Bitcoin reaches 0$, this means that no one is using 40% of the entire crypto market, which is very unlikely, at least for now.