The value of Bitcoin after a sharp fall again exceeded 40 thousand dollars. At the time of writing, the first cryptocurrency is trading at $ 42k. Negative news over the past week has weakened investor sentiment towards Bitcoin and other cryptocurrencies. In May, Musk’s statements were the reason for the fall in rates of major cryptocurrencies. So, on May 13, he announced that Tesla would stop selling its cars for Bitcoins. After that, its rate immediately collapsed by 17%.
On May 19, the cost of almost all cryptocurrencies from the top ten of the CoinMarketCap service began to decline. The value of Bitcoin, in particular, fell by 33%, to $ 30 thousand. Since April 14, when the main cryptocurrency reached an all-time high of $ 64.8 thousand, it has more than doubled in price. Ethereum, Cardano, Dogecoin, and XRP fell more than 40%.
Thus, we see that the price of other cryptocurrencies correlates with the price of Bitcoin.
Further confirmation of this is that when Bitcoin (BTC) hit the recovery path and reached $ 42,000 on May 20, altcoins also joined the largest cryptocurrency in its record return. So, ADA Cardano grew by more than 70%, and Dogecoin (DOGE) – by 55% (note that the world’s largest owner of the Dogecoin address bought another 420.69 tokens). Ethereum (ETH) is up 40%.
Overall, the top 10 cryptocurrencies by market cap have generated 40% or more daily returns thanks to the Bitcoin recovery.
Should we expect the recovery of Bitcoin to higher levels?
It is still difficult to say whether the cryptocurrency will hold on to values above $ 40,000. However, the number of supporters of the concept of the so-called healthy rollback is growing in the expert community. For example, CoinShares strategist Meltem Demirors believes that periodic exacerbations of volatility are phases of market development that accelerate its maturation.
Ultimately, Bitcoin and Ether will benefit from the current turbulence as alarmists are forced out of the market.
Demirors said on CNBC, “Last week we saw a net outflow of $ 50 million from Bitcoin funds. I think this is fearfulness and has to do with general markets and tax day sales”.
Note that short-term technical indicators such as the Relative Strength Index (RSI) and Moving Average Convergence / Divergence (MACD) have strong bullish signals. The first bounced off the oversold areas and is rapidly moving towards the middle line. This shows that buying activity prevails, and investors are betting on a recovery to higher levels.
While the recovery is in full swing, Bitcoin needs to confirm the gap above $ 40,000. Most investors remain skeptical of the recovery for fear of falling into a bull trap. A price movement above $ 42,000 will ensure that attention shifts from seeking support to seeking support in the $ 50,000 direction.
The reality is that Bitcoin is far from a magical money tree, and it is not immune to downward price fluctuations. In fact, we can expect sharp drops of up to 25% at a time as investors periodically withdraw profits.
Bitcoin was already experiencing a strong decline when it first climbed to $ 20,000 at the end of 2017, but then fell to less than $ 5,000.