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Cryptocurrencies Turn Choppy as Bounce Momentum Falls

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May 26, 2021

On Thursday, cryptocurrencies declined once more but did not go beyond the recent lows, as there were enough traders clinging to hopes that the asset class will be able to crawl back up from the past week’s plunge. In Asia, Bitcoin declined by almost 4% to hit a value of $37,600, and Ether, which is the next biggest crypto-token, also fell by 7.5% to reach $2,676. This left both of the cryptocurrencies quite well above the deep troughs they had hit a week ago, but it was still miles shy of the all-time highs they had managed to reach in mid-April. 

According to some analysts, the decline in value appeared to be relatively modest as opposed to the recent volatility and they highlighted the market finding some ground. But, it remains clear that the wavering enthusiasm expressed by Elon Musk, the CEO of Tesla, and the clear regulatory attention will remain to be some major risks for the market as a whole. As trading calmed down to some extent, market experts said that it seems the big cleanout has probably happened. They said that some people may lose patience and decide to abandon the market, but it seems that things are settling down somewhat.

There will still be some traders and investors out there who are wishing and hoping that their long crypto positions would once more claw their way back up into the green. The efforts by Beijing to crack down on the trading and mining of cryptocurrencies and the announcement by Elon Musk about Tesla no longer accepting payments in Bitcoin due to the environmental impacts of mining the cryptocurrency had triggered the fall in the crypto’s price. Apart from that, it was also announced by the U.S. Treasury Department that the Internal Revenue Service was to be informed about large cryptocurrency transfers. 

Furthermore, the Federal Reserve also issued warnings about the risks to financial stability posed by cryptocurrencies. According to market experts, people shouldn’t consider these digital currencies to be a substitute of money. Instead, they should be regarded as alternative assets because that’s what they are, but they should remember that they don’t really have any intrinsic value. In fact, they went on to say that people shouldn’t confuse blockchain technology and the potential it boasts with cryptocurrencies because they are not the same. These are some of the comments that have been made by Bitcoin and crypto critics.

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Due to these nagging doubts, Bitcoin has not been able to close above its 200-day moving average after it plummeted to reach the four-month low of last week. The crypto lost nearly 50% of its value and came down to as low as $30,000. As far as this week is concerned, Bitcoin has gotten some support and has hovered near a value of $37,000, but it hasn’t been able to go beyond the value of $40,904. As far as Ether is concerned, it had come down to a low of $1,730 last weekend, but it has now managed to attract buyers beyond $2,500. 

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