Bitcoin has been on a rollercoaster ride in the past week. It crashed more than 50%! So what’s next asks, Markus Heitkoetter of Rockwell Trading?
What is causing the Bitcoin crash? Is Bitcoin still a good investment? In this blog post, we will answer these questions.
Cryptocurrency Markets Crashed by 50%. What’s Next?
What happened? Bitcoin gained a lot of popularity in late 2020. It went from $10,000 to $42,000 in four months before crashing 30% to $28,000 in late January 2021.
And then, in February 2021, Elon Musk added fuel to the fire by saying that Tesla (TSLA) bought $1.5B in Bitcoin and plans to accept it as payment for its cars.
Source: CNBC
As a result, Bitcoin rallied above $60,000. At that time, it seemed that more and more companies are jumping on the cryptocurrency bandwagon. In late March, Paypal announced that it will allow cryptocurrencies as payment, mainly Bitcoin, Ethereum, and Litecoin:
Source: CNBC
Bitcoin is reaching new highs of more than $64,000 when some investors are taking profits, which is absolutely normal. Bitcoin drops to $48,000 but quickly bounced back to $60,000.
Why Is Bitcoin Crashing? Bitcoin Crash 2021: What You Need To Know
But then, on May 12, 2021, Elon Musk sends THIS tweet:
In a matter of minutes, Bitcoin plummets 5%.
Over the next few days, the bad news keep piling on. JP Morgan (JPM) reported that institutional investors are dumping Bitcoin and going back into gold:
Source: CNBC
And two days later, China calls for crackdown on Bitcoin mining and trading:
Source: CNBC
And if that’s not enough, now the US Treasury is cracking down on cryptocurrencies too, saying that they will require any transfer worth $10,000 or more to be reported to the IRS.
Source: CNBC
Bitcoin has been crashing more than 50% in just over a month. From $64,000 on April 14, 2021 to ~ $30,000 on May 19, 2021. As a result, companies that are tied to Bitcoin and other cryptocurrencies are tumbling, too: Tesla (TSLA), Square (SQ), Coinbase (COIN), and Cathy Wood’s Ark Innovation Fund (ARKK).
Is Bitcoin Still a Good Investment? (How Does It Affect YOU?)
Will Bitcoin prices recover? Is the Bitcoin crash in May 2021 just temporary, or is this the end of Bitcoin? You know me: I like to trade what I see and not what I think. Let’s take a look at the charts. Bitcoin has broken the 200-day moving average, which is a bearish sign:
We’re also past any “normal” Fibonacci retracements, and are still in a downturn. After all the negative press, especially regarding its energy consumption, it might be tough for Bitcoin to recover.
Alternatives to Bitcoin
There are other interesting alternatives.
Ethereum:
All of the cryptocurrencies are going down. Looking at a chart for Ethereum, ETH, it has not crossed the 200-day moving average yet. It has found support and is now bouncing back.
Ethereum uses less than 1% of Bitcoin’s energy consumption per transaction.
Here Is Why I’m Getting Excited for Ethereum:
Think about it from a trading perspective. If I could pick up ETH for a price of around $2,000, what is the upside? It could double and go up to around $4,000, which is very possible. Or it could go down to $1,000. This gives me a 2:1 risk/reward ratio.
Litecoin:
Litecoin has also recently dropped quite a lot trading at around $173. Let’s say that we can pick this up for a longer-term investment for around $150. What would be the downside?
The downside is maybe it drops to $75, but could the price go as high as $300 or $400? Absolutely! You could 2x or 3x your money.
This is why, right now, I’m not too interested in Bitcoin. I think Bitcoin was a little bit overhyped, and people are now dumping it, but I am interested in these other cryptocurrencies.
Libra/Diem
Facebook is back, and they announced a cryptocurrency called Libra. They want to work with regulators and will rebrand the coin Diem. I will be keeping a close eye on this one and here’s why:
Think about it. Facebook with their vast network with Facebook, Instagram, & Whatsapp. If they want to push a cryptocurrency, they definitely have the power.
What Will I Do?
Right now, I will be keeping a very close eye on what is happening in the cryptocurrency markets, and I’m looking to buy some cryptocurrencies at these levels when they are available at a discount. Full disclosure, I currently have not bought any cryptocurrencies, but I’m currently doing research and looking into a few wallets. If I can get them at a discount, I’m currently very interested in this.
Learn more about Markus Heitkoetter at Rockwell Trading.
