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Bitcoin’s big selloff was a long time coming: Investors decode crypto’s massive slump

The token plunged below $50,000 in Friday trading for its worst week in almost two months as a proposed tax hike for wealthy Americans intensified an industry selloff. Talk to investors and analysts and many will say it was a long time coming with last week’s rally in the satirical Dogecoin and the eye-watering valuation for Coinbase Global Inc. clear signs of market froth. Throughout April, the markets have been slightly overheated due to a large number of margin and leveraged traders. Notably, though, the price of Bitcoin fell only 25% from the recent all-time high and there are reasons to believe the overall trend will remain bullish unless the price drops below $40,000.” It might happen, we will hear as many ‘experts’ saying this is a sign of Bitcoin becoming a ‘maturing mainstream asset’ if it falls 10% this weekend, as we do when it rises, or a crypto-exchange chooses to IPO.

Prices are still historically high and the fall over the weekend appears to have been a fairly standard reversal after peak prices, which was magnified by three factors. First, the liquidation of a record number of leveraged bets. Second, there had been a build up of Bitcoin on exchanges, which is typical when people are waiting to see if the price will continue to rise or reverse. When it reversed these holders likely rapidly sold. Third, all of this happened in an illiquid weekend market that appeared to have relatively few buyers.

Source: Economic Times

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