Bitcoin has just suffered the worst month in its history, and yes, that includes the entire crypto winter of 2018, in a way. Of course, back then, BTC lost more in terms of percentages. It lost over 80% of its price back then. This time, it lost roughly around 50%. However, in 2018, 80% was $17,000. This time, 50% is equal to $27,000, meaning that Bitcoin lost more money in one month than ever before in its entire history.
Now, a new week is starting, and the coin is still in the lower $30,000s. This is all happening in a very risky and uncertain period. Traditional markets are far from stable this time. Many are worried about inflation, due to all the money printing that has been happening to provide people with momentary relief due to COVID-19.
But, what can we expect from Bitcoin? Is it going to come back from this crash, or will it continue to spiral down? Historically, summers have been a time of price growth, but there are no guarantees. Still, we can speculate, as there are multiple factors to consider, such as:
At the moment, the traditional finance industry is relatively stable. The West is quiet due to the holidays, while the Asian markets are mostly well under control. But, in the long term, there is great fear of inflation, particularly in the West. As mentioned, central banks have been printing a lot of money to help people during the COVID crisis. Many have lost their jobs, many have had their businesses fail, and many have seen increased costs for various reasons.
Relief packages were arriving, and that money had to come from somewhere. The central banks printed it, potentially causing a lot of negative long-term effects that investors are terrified of. In the past year, this fear pushed them towards gold and Bitcoin. This was one of the reasons why Bitcoin grew so much so quickly.
The signs of upcoming inflation are already visible. Manufacturing costs are skyrocketing, and the chances are that people will return to Bitcoin once again as the situation continues to progress.
- Short-term holders continue to sell
Another thing to keep in mind is that miners, whales, and HODLers are not touching their coins. The only ones who are selling right now are short-term holders, which are mostly newcomers to the industry.
When Bitcoin skyrocketed, it went higher than ever before. Its current ATH is 3 times higher than the one from 2017. As such, it attracted millions of new traders, all wishing to make easy money. However, these people did not have the time to study Bitcoin’s behavior, patterns, and alike. Some did not even bother to try.
As a result, they started panic selling at the first sign of trouble. This is what crashed the prices and what brought them down to $30,000s. Meanwhile, those who are in it for the long run know not to sell, and so they continue to keep their reserves untouched, awaiting strength in the future.
- DMA WMA
As always, technical indicators can be a major source of information for the future of BTC prices. In its recent market update, Decentrader highlighted the 20-week moving average (WMA) and the 200-day moving average (DMA).
The update shows 200 DMA sitting above $40k, where BTC’s price fell from last week after being rejected. Meanwhile, the 20 WMA is at $49k. This led Decentrader to the conclusion that BTC might surge to the 20 WMA level, which would act as a resistance. However, that surge depends on whether BTC will see sufficient demand at the level where it is right now.
But, there is also a possibility that BTC could drop lower, likely to low $20,000s, which would mean a loss of 78.6%. For now, the future remains unknown.
- Funding rates
On a more positive note, funding rates seem to be providing some hidden signs of bullishness. At the moment, they are very harmful, indicating that shorts are paying long. This market has been rather chaotic when the prices went down, but it has now calmed down, and is ready for a fresh start. This might allow for more organic price growth, which would be fueled by real demand from HODLers and others who are buying the dip.
In the end, this might be the worst May that the crypto industry has ever experienced. However, it might also mark the start of the next bull run, and a more genuine and honest one, at that, so there are things to look forward to, even now.