Following the bitcoin flash crash on Monday which wiped out over $200 billion from the crypto market, almost all cryptocurrencies continue to be on a downward trend with no signs of recovery yet.
Bitcoin is down by about 7 per cent on Tuesday compared to Monday, and is currently trading at close to $42,000.
Ethereum (ether) has also fallen by more than 7 per cent, while Cardano (ada), Solana (SOL) and dogecoin have also lowered in values by over 5 per cent compared to their prices a day earlier.
While it is hard to pinpoint exactly what caused the prices to drop, some experts tie the latest flash crash to China’s property market.
Some analysts warn that the latest price dip could form part of a longer term trend while others remain convinced that any short term volatility will ultimately be forgotten as bitcoin rises to new all-time highs in 2021.
You can follow all the latest news, updates and expert price predictions in our live blog right here.
Is bitcoin price still on track for $100k in 2021?
Zooming out on the longer-term market may put bitcoin’s current price difficulties in perspective, but it offers little help in predicting its future trajectory.
Analysts remain divided over whether this is the end of a so-called “dead cat bounce” within a bear market, or if it is just a blip on the way to new all-time highs in 2021.
Subscribing to the latter theory is Brad Yasar, CEO of decentralised finance (DeFi) firm EQIFI, who shared his thoughts with us. He believes bitcoin “isn’t going anywhere near” $25,000 and could still hit $100,000 this year. Here’s what he had to say in full:
‘When in doubt, zoom out'
A common mantra among bitcoin enthusiasts is ‘when in doubt, zoom out’.
The idea is that any short term price movements seem relatively insignificant when taking a broader view of the cryptocurrency market.
The current price of just above $43,000 is still more than twice that of any previous high seen before 2021. The question many analysts are asking this morning is whether this current cycle will mirror that of those seen in 2013 and 2017 – and if so, is it on the way up or down?
Bitcoin price prediction model still on track
One of the more remarkable things about the latest bitcoin price crash is that it fits in with an extremely positive price prediction model.
Pseudonymous analyst PlanB has amassed more than 800,000 followers on Twitter, largely thanks to the prescience of his Stock-to-Flow (S2F) model that he first applied to the cryptocurrency back in 2019 when the price was below $4,000.
The forecast, which takes into account bitcoin’s inbuilt scarcity, put it on a path way beyond $100,000 in this current market cycle, however with each price crash come fresh doubts.
After the price fell dramatically in the months following April’s all-time high above $64,000, PlanB made a rough estimate of the path bitcoin could take to reach above $100,000 before the end of 2021.
The June prediction put bitcoin at $47,000 in August (it closed last month less than a couple of hundred dollars off that price) and at $43,000 in September (roughly today’s price), before surging to $63,000 in October, $98,000 in November and $135,000 in December.
While it is hard to pinpoint what exactly caused the latest bitcoin flash crash, some experts say it could be tied to China’s property market.
Experts say concerns surrounding speculation that the Evergrande Group – China’s second-largest property developer – will default on its $300 billion in debts could be driving the current crypto market crash.
To allay fears over the property developer defaulting on its pay, Chinese authorities have injected about $14 billion into its banking system.
However, the cryptomarket continues to nosedive, valued currently at $1.87 trillion – dropping in value by over 7 per cent in the last 24 hours.
Bitcoin, which was valued at close to $47,000 on Monday morning, is currently priced at $42,000, with no signs of recovery yet.
Other cryptocurrencies, including Ethereum (eth), Solana (sol), and Dogecoin (doge), are also down by more than 5 per cent over the last 24 hours. The chart still looks all red with no signs of recovery yet.
Bitcoin is 'cyberspace bank’ serving the unbanked
One reason for El Salvador’s president, Nayib Bukele, to “buy the dip” today is because he sees the long-term potential of the cryptocurrency in countries such as his.
Just two weeks after El Salvador officially introduced the Bitcoin Law, which officially made the cryptocurrency legal tender, more than 1.1 million people are already using it as a day-to-day currency. That’s roughly one sixth of the country’s population that didn’t previously have access to traditional financial services.
“It seems that we will be able to bank more people in one month, than they did with nationalisations and privatisations of traditional banks in 40 years,” President Bukele said.
It prompted another staunch believer in bitcoin, MicroStrategy CEO Michael Saylor, to praise bitcoin and the stance El Salvador has taken. As the largest corporate investor in bitcoin, with billions on its balance sheet, it wouldn’t be surprising to learn that Saylor is also buying the dip.
Bitcoin in ‘greatest buy zone in history'
Many long-term bitcoin holders are using today’s price crash to push the “buy the dip” narrative in the hope that it will bounce back stronger.
Bitcoin podcaster Cedric Youngelman even goes as far as describing it as “the greatest buy zone in history”.
Other traders are offering a more cautious view on the market, with bitcoin author Glen Goodman describing it as “choppy hell” that is too risky to call either way.
“This is why most of my money remains on the sidelines, waiting for better opportunities,” he says.
Bitcoin price stabilises?
The price of bitcoin appears to have stabilised at around $44,000 following the series of flash crashes earlier in the day that saw it drop from above $48,000.
Other leading cryptocurrencies also seem to have levelled out, with Ethereum (ether) just holding above the $3,000 mark and dogecoin managing to keep above $0.20.
Which way it goes from here depends on who you ask, with many bitcoin maximalists backing up Salvadoran President Nayib Bukele by claiming that now is a great time to “buy the dip” in anticipation of future price gains.
Bitcoin sees huge interest from institutional investors
One thing that has been interesting about major bitcoin price crashes in 2021: each low has still been way above any previous high seen in 2020 or earlier.
One reason for the lows being not as low as those in the past is that bitcoin is now bolstered by massive institutional investment. New research from Fidelity Digital Assets has found that 52 per cent of institutional investors now hold bitcoin or other cryptocurrencies
We’ve heard from Simon Peters, a market analyst at the online trading platform eToro, who explains what this means for the overall crypto space.
Bitcoin price pattern mirrors 2013 and 2017
The counter argument to the ‘dead cat bounce’ theory from the last post is that this bitcoin price crash is just a blip amid a record-breaking bull run.
Similar dips were seen in 2013 and 2017 in the run up to new all-time highs, and some analysts have pointed to “consistent” market patterns this time around.
Bullish analysts believe the peak of this current cycle is above $100,000 - way above the $64,000 price record seen earlier this year - and that it will be hit before the end of 2021.
Currently at around $44,000, bitcoin has a lot of climbing to do if it’s to achieve that.
Bitcoin price crash ‘dead cat bounce’ completed?
The latest price crash has divided bitcoin analysts over whether this is the beginning of a longer-term downward trend, or just a blip on the way to new all-time highs.
According to the pseudonymous Mr Whale, who has racked up more than a quarter of a million Twitter followers with his largely pessimistic predictions, the recent price gains were part of a “dead cat bounce” price pattern.
This is where the price rebounds during a bear market, before continuing to plummet. Mr Whale shared this image today to illustrate the phenomenon, though there has been plenty of pushback from crypto advocates dismissing this take.
Mr Whale puts bitcoin on a path to reach below $10,000 within the next year, though it should be noted that he had bearish forecasts all throughout the 2020/21 bull market.
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