After a year of successive price records, bitcoin (BTC) is expected to close this month of May as the worst in the last ten years. The cryptocurrency reached the top of almost US$ 65,000 in mid-April, but the last few weeks have been very negative for the performance of the main digital asset in the market, which this Monday (31) is traded around the US $35,000.
The cryptocurrency has accumulated around 38% devaluation in the last 31 days, losing only to September 2011, when bitcoin plummeted 40%, according to the index CoinDesk. At its worst, the digital asset hit $30,000, virtually the price it opened in 2021, just after the beginning of the latest digital currency boom.
As a result, the market value of bitcoin, which reached the surprising number of US$1.2 trillion at its peak, is now around US$650 billion, according to data from the CoinMarketCap. The cryptocurrency’s dominance also dropped sharply during this downturn. Digital assets represented almost 70% of the entire capitalization of the sector at the beginning of the year, while this percentage has now dropped to around 40%, making room for the growth of other currencies, such as ether (ETH) and dogecoin (DOGE).
Market is suspicious after announcements from Tesla and China
The mood among investors was tense after Tesla announced it had suspended bitcoin payments for its electric cars. Elon Musk, the company’s CEO and a big influencer on cryptocurrency prices, also indicated that his company could sell its billion-dollar fortune in digital assets.
The market, already restless and filled with distrust of bitcoin, has entered a chaotic state after the People’s Bank of China imposed new bans on cryptocurrencies. The Chinese government has announced that financial institutions are prohibited from transacting with digital assets and from offering related services.
The tough regulatory move coupled with the growing loss of confidence in cryptocurrencies intensified sales of bitcoin, ether and other assets, causing the sector’s most significant downturn this year. Since then, the recovery still seems a distant dream and the prices of the main tokens are stagnant.
Bigger bitcoin volume is stopped
According to blockchain analysis company glassnode, the price drop was mainly caused by the panic caused by the sales of new investors who bought currencies during the high period of the first quarter. Meanwhile, holders and institutions had been buying during the falls in a sign of confidence in the cryptocurrency’s long-term price prospects, predictions that have now also shaken, encouraging stagnation.
#Bitcoin market currently has three supply trends in play:
– Short Term Holders are distributing.
– Long Term Holders are HODLing/Accumulating.
– Miners are Accumulating.
The $BTC market is a battleground between the bulls and the bears.
Live Chart: https://t.co/SlhNLLbZce pic.twitter.com/QEaezY6E2b
— glassnode (@glassnode) May 31, 2021
The volume of bitcoin held by so-called whales (whales), addresses of digital wallets that belong to a single entity with large amounts of stored cryptocurrencies, rose by an average of 25,000 BTC, reaching the current 4 million non-cash coins since May 19th.
While whales hold their assets and new investors, mainly from retail, desperately sell their cryptocurrencies in fear of losing their equity, there are miners who create new units. They are also responsible for the current stagnation, as there is no advantage in selling your earnings during this down period across the entire crypto market.
With information: CoinDesk