Bitcoin Dip — An Opportunity In Disguisebitcoin depot
Bitcoin recently suffered its largest slide in months. For the last few months, the coin has been on a crazy bull run that has seen it almost double its already dizzying heights reached in December 2020, reaching an almost 450% increase in price since October of 2020. But now, it appears that this run has come to an end...
...or has it? Many thought that the bullish run that Bitcoin was on topped out in December 2020, but they were quickly proven wrong. The important question is why? Why is Bitcoin suddenly sliding down the graphs? And what does this slide mean for the future of the coin?
Why Is Cryptocurrency Sliding?
First off, how much has Bitcoin dropped? The answer is a lot. The bitcoin & cryptocurrency market lost over $400,000,000,000 (four hundred billion!) since its peak in mid-February. Bitcoin especially has slumped as much as 20% in recent weeks.
One reason for this is widespread panic amongst traders. This panic was a result of a record liquidation of highly leveraged Bitcoin futures contracts. This liquidation lit a "tinderbox", which caused panic to spread around the market. And as the panic spread, more people began to sell off their Bitcoin holdings, which led to a massive sell-off in the market. This massive sell-off of Bitcoin assets also spread to other cryptocurrencies like Litecoin & Ethereum, which also experienced a decline.
Surprisingly, many cryptocurrency experts were not surprised at the fall of Bitcoin. According to cryptocurrency trader and expert Glen Goodman, the Bitcoin market has always been a tinderbox that has been waiting for a spark. Goodman says a lot of traders have already used huge sums of money to buy Bitcoin futures contracts, betting that the price of Bitcoin will continue to rise. When people borrow to go "long" on Bitcoin, which means they bet that prices will continue to rise, they push up the interest rate on Bitcoin and cryptocurrency exchanges.
What happened is that their interest payments on that borrowing reached crazy highs, and at a point, the annual rate per year reached about 144%. Something like that was unsustainable, and the market was primed for any hint of panic to drive prices back down.
Another reason why panic spread through the markets was the comments of Tesla CEO, Elon Musk. Just a few days before the crash in prices, Musk tweeted that the price of Bitcoin “seemed high”. That comment served as a warning for crypto traders that a correction was on the horizon.
Earlier that week, Musk tried to distance himself from Tesla's $1.5 billion Bitcoin-buy. He said that Tesla's purchase of the Bitcoin was not directly reflective of his own opinion. These comments sound a bit innocuous, but they served as a warning to investors. It's little wonder that a few days later, Bitcoin came crashing down, with over four hundred billion dollars getting wiped out within a few days.
What Happens Now?
Many analysts believe Bitcoin will not experience any dizzying heights anytime soon. The effects of Bitcoin's price fluctuations in the market have been heavy, and it is thought that the market will need some time to recover.
Thankfully, interest rates are now back to normal since the tinderbox has gone off, and all the mounting pressure has been released. Some people believe that the sell-off of Bitcoin assets may continue, but according to Goodman, there's no logical reason for that to continue. Sure, many will panic sell, but a lot of people will be reasonably satisfied with their position.
However, they aren't under any delusions. Bitcoin holders may continue to look to cut their losses, and may continue to sell, but that in itself says nothing about the utility of Bitcoin. Very few analysts expect Bitcoin to go lower than the $30K mark, even if things continue to get worse. That's remarkable, given that this level was the highest point Bitcoin had ever been at as of the end of December 2020. The sentiment that's widespread among analysts is that Bitcoin is simply experiencing a healthy correction, which was long overdue because of the lengthy bull run that the coin was on.
An Opportunity to Buy
Amid this downturn in Bitcoin fortunes, many traders are seizing the opportunity to fortify their Bitcoin positions. Many believe that it’s near-certain that Bitcoin will continue to rise and they are already using this opportunity to buy a lot of Bitcoin.
Since the advent of Bitcoin ATMs that allow people to buy and sell Bitcoin easily, it has gotten easier for regular people to get Bitcoin without going through third-party apps that make it a lot more difficult for the average investor. These ATMs for Bitcoin offer a simple route for the regular user to get into cryptocurrency, without the complexity of traditional cryptocurrency buying platforms.
For now, Bitcoin is ranging, but sometime in the future, it could go on another bull run, and the people who purchase Bitcoin today will be the ones to reap the benefits.
March 16, 2021