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May 25, 2021 @ 15:35 +03:00
The crypto market begins the working week with a cautious attempt to grow. It is not surprising, given such extreme oversold conditions. The Crypto Fear & Greed Index for Bitcoin and major cryptocurrencies has reached a near bottom value at “10,” which corresponds to the “extreme fear” mode. The lower the value, the higher the chances of a rebound. Now, however, the situation can be much more complex and multifaceted.
Sometimes fear becomes so strong that it blocks investors’ desire to “hunt for a discount” and activates other scenarios in which fears outweigh all other behavioural patterns. It is this momentum that could activate a broad market trend reversal.
Bitcoin experienced a new wave of pressure over the weekend, once again testing support near $30K. With the start of trading on Monday, buyers were back in the forefront, bringing prices back to $35K. It is an important area that includes the lows of January and the 200-day simple moving average.
Perhaps a simple chronological summary will help to better structure and understand what is going on. First, market participants saw a historical high for Bitcoin around $65K, after which the positive backdrop around the first cryptocurrency began to decline from euphoric levels. Then BTC broke through several important round levels ($60K, $50K), but the tug-of-war between bulls and bears was written off as “normal market behaviour after reaching a series of historical highs”.
This point was the start of the next phase – altcoin euphoria – as Bitcoin became too “expensive.” While alternative cryptocurrencies were rising, Bitcoin was gradually sliding down.
At some point, the belief in altcoins and Bitcoin’s declining dominance index led market participants to believe that Bitcoin actually had serious opponents. However, we are convinced that, as in 2018, problems with the first cryptocurrency are more often causing fierce sell-offs of alternative cryptocurrencies of any rank, confirming the fundamental role of the first cryptocurrency.
The main negative message of late is that the crypto market, though it has seriously matured over the past few years, still remains extremely exposed to a small number of factors and statements by authoritative Influencers like Elon Musk.
Apparently, the cyclicality of the cryptocurrency market is not only due to halving and other factors but also to the relatively rapid renewal of investors willing to believe in the prospects of cryptocurrencies. This time, buying in the crypto market was driven by institutional investors, but like last time, they are the ones who come out with the profits. We can assume that the “cryptocurrency inoculation” has been in effect for several years.
At this stage, the crypto market may recover fairly quickly from the “China factor,” Musk’s sales, hypothetical mining transfer, and other negative factors. However, even with key support levels unbroken and coins showing attempt after attempt to return to growth, we are now very close to a tipping point for the prospects of the crypto market for the next few years, and there are more and more reasons to sell.
The FxPro Analyst Team