The market correction that many crypto analysts have been predicting for weeks seems to have finally arrived.
Indeed, crypto markets are seeing red across the board: Bitcoin (BTC) was down 15.2 percent at press time, sitting at 46,779.18. Less than one hour before, BTC had fallen to as low as $46,931.40. Ether (ETH) had fallen a whopping 19.57 percent at press time, sitting at $1,464.38. Even Binance Coin (BNB), which has been posting high gains throughout the past week, had fallen 20.8 percent to $208.00.
Binance’s Chief Executive Changpeng Zhao was quick to point out that while the drop may have been significant, the levels that markets have fallen to were “new all-time highs” just last week. “#bitcoin crashed, back to its ATH 5 days ago, at $50,000,” he wrote on Twitter.
#bitcoin crashed, back to its ATH 5 days ago, at $50,000.
— CZ 🔶 Binance (@cz_binance) February 23, 2021
Additionally, Altcoin and DeFi markets have been affected by the drop: XRP, Litecoin (LTC), Chainlink (LINK), Stellar Lumens (XLM), Dogecoin (DOGE) and Uniswap (UNI) have seen drops of more than 20 percent (or even 30 percent) over the last 24 hour period.
Still, while the drops are significant, some analysts believe that they will be short-lived. Pseudonymous trader and analyst, @Rekt_Capital wrote on Twitter that: “one day, a #BTC Bear Market will come. But, today is not that day.”
One day, a #BTC Bear Market will come
But today is not that day#Bitcoin
— Rekt Capital (@rektcapital) February 23, 2021
Of course, what goes up must come down, and crypto markets have been performing incredibly for weeks. What finally triggered the sell-off? How low will crypto markets go? And, what does this mean for the long term?
Worst-Case Scenario? Bitcoin Could Drop as Low as $30,000
Paolo Ardoino, Chief Technical Officer at cryptocurrency exchange, Bitfinex, explained that the price drops are not necessarily signs of fundamental problems within the cryptocurrency market space. “Today’s drop [seems] to be a correction in BTC,” he said.
How low will Bitcoin go? Of course, it is impossible to predict the future. However, Michaël van de Poppe, a full-time Trader from the Amsterdam Stock Exchange, tweeted on Monday morning that: “I think we’re close now.”
“Resistance zone at $48,500 and $51,000,” he wrote.
Approaching bounce region for #Bitcoin.
I think we’re close now.
Resistance zone at $48,500 and $51,000. pic.twitter.com/ctsLwLpVFD
— Michaël van de Poppe (@CryptoMichNL) February 23, 2021
But, further drops could be in the cards for BTC. David Lifchitz, Chief Information Officer at quantitative trading firm, ExoAlpha, told CoinDesk that: “$50,000 looks like the first stop for a mild pullback, but a second leg down could take it down to $40,000, while the $30,000 zone looks like the ultimate bottom should things turn ugly in the short term.”
Bitcoin Market Analyst, Willy Woo wrote on Sunday that: “This is the $1T consolidation level. Let’s just enjoy the view and not freak out, this moment will be fleeting.”
This is the $1T consolidation level.
Let’s just enjoy the view and not freak out, this moment will be fleeting.
— Willy Woo (@woonomic) February 21, 2021
“We Had Clear Signs of over-Leverage and Exuberance in the System.”
While it is unclear how deep the drop will be, many analysts agree that the drop was not unexpected. In a statement shared with Finance Magnates, Delta Exchange Chief Executive, Pankaj Balani told Finance Magnates that there have been signs that the market was overbought for weeks.
“Throughout the last week, we have seen traders chasing laggards,” Balani told Finance Magnates, adding that Bitcoin and Ether weren’t the only coins affected by this upward trend. “There was a sharp pick-up in altcoin trading activity as markets looked for upsides outside of Bitcoin and Ether.”
Indeed, “we had clear signs of over-leverage and exuberance in the system,” Balani told Finance Magnates.
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Did Elon Musk Cause the Bitcoin Drop?
What may have triggered prices to fall? A number of analysts believe that it may have something to do with Mr Elon Musk.
“Commentary from Elon Musk seems to have acted as the straw that broke the camel’s back and triggered the due correction,” Balani said.
Indeed, on Saturday, Musk tweeted that: “BTC & ETH do seem high lol” in response to a conversation thread between himself and Bitcoin bear Peter Schiff. Musk had previously said that Bitcoin was a “less dumb” alternative to fiat money.
That said, BTC & ETH do seem high lol
— Elon Musk (@elonmusk) February 20, 2021