With Bitcoin crashing to support at $58,000 and most cryptocurrencies down at least 10%, is this the start of a more extensive correction for crypto, or is this just a shake-out of the weak hands before crypto continues on its bull run?
Bitcoin is currently back over $60,400 after a 2-day drop that took it from $66,300 down to a local low of $58,570, an 11.7% correction. The global crypto market cap also saw a loss of 10% in the last 24 hours to take it down to $2.7 trillion as per CoinGecko.
Reasons for the crypto dip?
There don’t appear to be many fundamental reasons for the dip. The SEC rejected the VanEck Bitcoin Spot ETF recently, which could possibly have changed the minds of some institutions who were looking for this to happen.
The Chinese authorities announced that they would be considering punishing the last vestiges of crypto mining in the country with punitive prices on the electricity bought by the miners.
Biden signed off on the infrastructure bill that could have quite serious implications for the regulatory environment surrounding crypto. The bill became law yesterday, and it’s not known if a new stand-alone bill will be able to narrow the scope of those who have to report tax data to the IRS.
However, when all is said and done, this is very likely already priced into the market, and there doesn’t appear to be anything else particularly at odds with crypto currently, and given that price just doesn’t keep rising, we were probably due for a healthy correction.
Also, one very likely rationale may well be the extremely high amount of leverage still in the market. The previous dip over the last week just didn’t have enough punch in it to clear out anything like a reasonable quantity of retail speculators.
According to the liquidation data on Coinglass, over the last 24 hours 214,000 traders were liquidated with a loss for them of $875 million. Maybe still not enough to really reset the crypto market, but this would have helped.
Bitcoin is already making its way back up. It’s currently sitting at around $60,800 at time of writing, and it appears that the very strong support at $58,000 has done its job for now.
That’s not to say that there won’t be a bit more choppiness over the next few days, and bitcoin still has to rise back above some flipped resistance at its current level.
For those holding long-term, this is probably the smallest of little bumps along the way, and when we are once more back to the $68,000 highs, hold on to your hats, as the next few weeks can see some extremely strong upside.