A week later, almost half a trillion dollars or 20% has been wiped from the crypto market capitalisation. Although 20% is not an unusual move in crypto the timing has caught some by surprise.
There were some subtle and not so subtle warning signs that crypto sentiment may have been turning. Elon Musk’s bombshell decision last week to stop accepting Bitcoin for car purchases due to its carbon footprint a more obvious one.
Musk’s announcement was followed a few days later by another previously big advocate of Bitcoin. The CEO of Twitter and Square, Jack Dorsey said he had no plans to buy more Bitcoin after Square lost $20 million on Bitcoin last quarter.
Another warning shot, the Colonial Pipeline Co paid a nearly $5 million ransom in Bitcoin to hackers last week to restore the United States largest fuel pipeline. These three events along with more aggressive messaging from regulators have prompted fears of an imminent crackdown on crypto-assets.
In some ways, the events mentioned above have done some of the regulator's work, by removing some of the speculative froth from the market. Regulators concerns over money laundering and other criminal uses of crypto assets, offset by the benefits cryptocurrencies bring to an ever-growing digital economy.
Turning to the charts. In our last article on cryptocurrencies in early May here it was suggested allowing “for another leg lower (Wave c) towards support at $42,000 where signs of basing will be watched for as an opportunity to buy Bitcoin, in anticipation of the uptrend resuming.”
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While there is nothing concrete yet in terms of a base at $42,000, it's encouraging to see the support level highlighted in our previous article well-defended thus far. Not far below, is support from the 200-day moving average at $39,700.
Should this support region hold, a daily close above $48,000 would be an initial indication the uptrend has resumed, looking for a retest of the April $64,895 high.
Source Tradingview. The figures stated areas of the 18th of May 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
