- Instances such as Grayscale trust buying $600M of Bitcoin crypto asset in a single day and Blackrock announcing two of its funds will trade bitcoin derivatives in the future signify the volatility would soon stabilise.
- Experts state the price movement is a perfectly natural correction due to a perception that it might be a little overbought. In this case, the prices are slipping but the bitcoin demand is not
The pace at which Bitcoin was rapidly increasing, a phenomenon was anticipated whereby the fall downwards would hit hard. Presently, the crypto market is going through the same. In the last couple of days, around $100 billion has been shaved off the entire crypto market valuation. For e.g. the price of BTC has fallen from $35,900 to $28,800 in a matter of 2 days translating to a total drop of 19.77% before stabilising around the $30k region. Despite the drop, bitcoin has a touch over $600 market valuation.
Institutional Appetite for Bitcoin
Institutional investment has increased significantly during the pandemic due to the fear of traditional investments collapsing. The recent price movements and volatility are largely due to the money pumped and removed by the large players.
Another aspect gaining attention is the possibility of miners or mining pools selling crypto assets and subsequently price reduction of Bitcoin. The latest 30 day average of Miner’s Position Index (MPI) rose to 2.20 and has touched 2.50 which is the highest in the last 2 years. A reading above 2.0 indicates the miners are selling. The MPI is defined as the Total Miner’s Outflow in US$/365 day moving average of outflows.
Fear, Uncertainty & Doubt (FUD)
This concept has been in existence but has been carved out under this context due to the increasing uncertainty for crypto assets amidst an expanding economy.
Multiple instances such as Regulatory hurdles, uncertainty of the new US government, negative comments from Janet Yellen and Christine Lagarde, environmental debates over proof-of-work, recent Ledger customer data hack have bought in an element FUD. However, the overall cryptocurrency proponents are optimistic on the performance of crypto assets in 2021.
In a nutshell, the overall cryptocurrency market seems to be stabilising and are susceptible to external events and other sentimental factors. Therefore, the performance of the digital assets will be impacted depending on multiple factors and the pricing direction can be anticipated regularly.
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