Bitcoin was falling below $30K yesterday, but buyers came to the rescue, allowing the coin to rebound to $31K. Bitcoin has lost 1.5% in the last 24 hours and is trading around $31,200. Interestingly, the downward pressure on Bitcoin began before the active decline in the stock market. Yesterday, however, cryptocurrencies held up better than stocks.
At the beginning of the year, exceeding $30K was thought to be a strong indicator that a broad correction was coming, but it did not happen. Moreover, the coin surpassed $40K and paused the profit-taking decisions of some large market participants.
For most investors who entered late last year, the recent historical highs were extremely attractive profit-taking targets. It is the consequences of such profit-taking decisions that we are now witnessing in the crypto market. There is no trend reversal because there is no panic selling.
Active asset purchases immediately after the plunge below $30K indicates the preservation of the pool of investors who are still willing to believe in the continued upward BTC dynamics. Market participants are still undecided about the relationship between Bitcoin and the traditional market. On the one hand, the asset has become part of it, as buying by traditional funds ramp up. On the other hand, it is unlikely that the decentralized digital code will ever fit into the market framework, which began working long before the advent of the Internet and computers in general.
2021 will probably bring us an update of the relationship protocol between the traditional market and cryptocurrencies. So far, the market has been moving along a “probing” trajectory. Basic infrastructure for investing has emerged around Bitcoin and some of the largest altcoins in recent years. However, there has never been a “clear yes” from regulators. No one has openly challenged first-generation cryptocurrencies, but it is clear that the prospects are quite shaky.
Authorities are making it increasingly clear that they will not put their main instrument of power – national currencies – in the hands of corporations or anyone else. At least not right now.
The FxPro Analyst Team