Major Bitcoin Correction could be in Store for the Crypto Markets

Bitcoin, which has so far had an amazing year, recently saw a crash take place. BTC token price dropped below 50,000 USD for the first time since March. That drop from several days ago dragged the price by 10 percent in a matter of hours. Last week’s worth of losses sums up to about 20 percent. In the trading hours when the biggest number of investors were active the price of this token went down low to nearly 48,700. Since then, the cryptocurrency did manage to rebound somewhat, reaching the figure of 51,000 USD before further drops.

During the weekend, this price level remained between 51,000 and 49,000 USD, inhabiting a relatively narrow space. However, there is a strong sense that a further correction might be in the cards. That is something that is unfortunate for many investors, especially those who entered the domain recently, but also very expected for analysts. Many of them, as well as crypto experts, have been pointing out for some time that the overheating of the crypto market needs to come to an end sooner or later.

Wiping of Value

Similar to other major drops in bitcoin price, the amount of money that went away from the market was massive. This quickly took place with other digital currencies as well, covering a range of drops. Major cryptocurrency networks like XRP, cardano and ethereum lost around 200 billion USD, along with the bitcoin network as the main driver of the drop.

This money was taken from the combined field of cryptocurrency market capitalization which stands near 2 trillion USD. With that huge sum being taken away from the market, the sense of fear began spreading and fake news and rumors began making rounds on social media. Of course, the wiping of value had its genesis in a number of actual news items that sound worrying for the crypto community. Chief among them is the speculation that US President Biden is planning to increase a particularly worrying tax.

Capital Gain Taxes Rumors

The US, like basically any other country in the world, is presently under drastic financial pressure. The pandemic and the lost previous year basically made all economics see red – apart from China. That included a loss of employment and pressure on the public and ordinary citizens on a level that has not been seen since the Great Depression. Because of that, governments had to do something and try to alleviate some of that pressure. Otherwise, jobless individuals would begin to lose home, the real estate market would collapse yet once again and the global financial crisis of 2008 would likely feel like a minor event compared to that calamity. All the while, the pandemic continued, offering little prospect of a drastic change in fortune. So, countries like the US began printing money and handing it out to their citizens, many of which desperately needed it.

However, that only means that the financial burden went further up the hill and is now on the shoulders of the countries themselves. Because of that, President Joe Biden and his team began working on getting some of that money back in the form of expanded taxes. These include a proposed increase of capital gains taxes. If passed, it would increase the taxes of those who make over one million USD per year. The details on this are still sketchy but such an initiative would surely bring down the financial hammer on the more well-off individuals. The same would then apply directly to their funds, companies, and all other institutional entities. However, the market did not react well to that possibility and whale investors began worrying about their crypto holdings tax payments. As a whole, the market reacted with a correction that pushed the price lower than it has been in weeks.

Massive Decline in Price

Things like capital tax hikes blended quickly with stories from Turkey, which recently banned cryptocurrency trading and closed many of its exchanges. As market watchers eyed the charts nervously, many analysts began discussing the possibility of a big correction in the price of bitcoin. The storyline here is a lot more complex than it would first seem. Some experts believe that a 50 percent correction has to be incoming sooner or later. It would take the price of bitcoin down below 40,000 USD, which has been a downwards trajectory marker for over the better part of 2021.

If that level is breached the question would be whether or not the price of the bitcoin token would reach 30,000 USD or even settles at 20,000 USD. For many, especially those who are relatively new traders, the same sounds like the worst possible news. However, in the age of esports and social media, catastrophic moments are more and more common and survivable. Bitcoin network already experienced moments that are identical to this one and chances are that it will continue to do so in the future as well.

Unbridled Optimism

Despite the plunge of the price and somewhat of a bearish set of news, many in the digital currency community are still beyond optimistic about the long-term prospects of cryptocurrencies. That is especially connected to bitcoin’s potential and the way it can shape the financial landscape. Furthermore, the previous period showed that countries in the developing and underdeveloped world now rely directly on crypto for their everyday needs. For those users, the issue is not whether or not they will create a profit from their casual investment, but whether or not they will be able to provide for their loved ones. That is why some analysts believe that the Crypto Winter of 2018 is not around the corner.

Today, the key hedge against that possibility is the incredible growth of the ecosystem around the digital token phenomena. Decentralized finance or DeFi is possibly the best-known example, but it is not the only one by any measure. Instead, it is enough to see just how many ordinary citizens across the world have access to digital wallets and how many companies, big and small, now hold cryptocurrency assets. All of this means that even a big market correction is not going to change the key fundamentals of the new chapter of cryptocurrency use on a global level.

Source: CoinDesk