Opinion Bitcoin and Crypto Markets Crash Spectacularly

Bitcoin and Crypto Markets Crash Spectacularly

May 22, 2021

The wild ride that was 2021 so far for the crypto community came to a crashing halt in mid-May. The further crash that began on Wednesday, May 19 only solidified the worries and apprehension of the crypto ecosystem and took down the markets in a spectacular manner. Of course, there is no amount of expectation or apprehension about the same possibility that prepared anyone for what did occur. Instead, the traders, investors, and anyone else interested in the same field simply watched in terror as the prices plummeted and the tokens saw a double-digit drop.

Now, as the prices continue to oscillate and the apprehension rises to completely new highs, many are wondering what is further in store for crypto markets in general. They are also wondering if they stand a chance to make a profit in the same turbulence or are they bound to find out that the worst is yet to come.

Looking for Bottom

The industry experts tend to underline that there are two types of news for the crypto market – bearish and bullish. While bullish news tends to be cumulative and slowly build up the price as something occurs, like a massive institutional purchase of BTC, for example, bearish news functions differently. They act suddenly and pull the markets almost instantly down. This takes place because of the simple fact that people tend to value avoiding losses more than they value making gains. The same is a completely instinctive move that many don’t even realize they are making, but it showcased itself perfectly during the latest crypto crash. Not minding the actual reasons for the same crash, the markets once more demonstrated their tendency to eviscerate value under the right circumstances.

In the age of social media, and other endless sources of information, the same breakdown in price value began spreading like wildfire. This triggered all of those ancient instincts about avoiding losses and quickly escalated into the worst day on the crypto markets since the March 2020 crash that is still vivid in the collective memory of traders and investors. Now, the same state of market extreme jitters is ongoing and no one can tell if the process reached the bottom. Instead, traders and everyone else interested in this domain simply need to wait and hope that their nightmare scenario – which is basically future degradation of prices – is going to materialize.

Bad News and More Bad News

Another important reason why the bottom position for the crypto markets is still not clear is the range of bad news that hit the crypto markets recently. What makes them even worse is the fact that they appeared spaced out almost perfectly to bring down the price in stages while also denying the markets any chance for a stronger correction. The season of bad news began when Elon Musk revealed that Tesla Motors will no longer be taking orders in bitcoin. The reason for this was the fact that the bitcoin network spends, according to Musk, too much energy on its mining process.

Because of that, the CEO of Tesla stated that it would be unethical to allow this process of payment conversion and BTC token depositing to continue. The moment this news came out, the markets began to shake and then drop substantially. At that moment, the market was in a state of overheating for some time. The correction downwards soon began in full force. Thanks to the interconnected nature of the modern trading environment, that news began spreading spectacularly fast, solidifying the pushdown. Soon, the markets were in a state of double-digit correction towards their older, previously established records.

Institutional Plays

The bull run of 2021 was marked by the injection of institutional funding for the first time in the history of this digital currency phenomenon. Prior to that occurrence, there has been ample writing on the wall that the change is in the air. Companies like PayPal began developing their crypto mechanisms and other businesses like Square, which provided crypto services for years, showed profit margins that were beyond impressive. Furthermore, these early adopters, like esports competitors, and their end-user applications like Robinhood or Cashapp already had a sizable base of customers long before 2021 began. So, the world of big business was not oblivious to the potential of crypto before this crucial year.

However, many of them were still very much hesitant about taking their corporate coffers and turning some of that extra fiat cash into the digital currency of any kind, including the biggest alternatives like bitcoin’s BTC token or ethereum’s ETH. That changed suddenly in the previous several months with the first crypto purchases that companies like MicroStrategy made and which were worth over one billion USD. This business was not alone in its determination to give bitcoin and even other cryptocurrencies a try. So, the bull run was in full force soon after. Sadly for the zealous investors and firm believers in crypto, it seems that this bull run is faltering, even with the dream of institutional investors coming to the fray finally becoming a reality.

Future of the Crash

Now, with the markets around 50 percent of the highest value for both bitcoin and ethereum, the question remains where will the near future take prices. No one can tell for sure that they even understand the balance of powers that influence crypto at the present moment. With news like the Tesla move slashing prices overnight and a stream of worrying and possibly catastrophic developments from China, the volatility factor remains huge.

At the same time, the fundamental value of the bitcoin network seems still burdened by the notion of being energy-wasteful. The facts around this claim get few if any deep-diving analysis and the public is apparently taking these claims of energy waste seriously. At least, the more vocal among them are doing this on social media. In this setup, bitcoin and the entire cryptocurrency domain need some strong and good news pretty fast. Otherwise, the record prices from just a month or two ago might give way to another crypto winter before the entire ecosystem even realizes what is happening.