Bitcoin (BTC) approaches $ 40,000 this week as ‘Dogefather’ Elon Musk inflicts sheer pain on hodlers – what’s next?
After a traumatic weekend for many crypto investors, Monday sets the stage for the next chapter in the wild 2021 bull market.
Cointlegraph examines five factors that could shape what Bitcoin and altcoins will do next.
Musk tweet hits key Bitcoin technical level
It’s about a man again this week: Elon Musk. Characteristically, the CEO of Tesla and SpaceX caused an uproar on Twitter when he came out bearish on Bitcoin.
BTC / USD sold out immediately upon the news that Tesla was suspending BTC payments for its products, but for Musk, that wasn’t enough.
Other tweets over the weekend, including criticisms of Bitcoin’s decentralization and how it “believes in crypto,” fueled the fire.
It was a clue that Tesla may already be considering selling his holdings, causing the most misery. Bitcoin fell to nearly $ 42,000, testing that all-time high again before leveling off, with Musk pointing out that no sells had taken place.
“To clarify the speculations, Tesla did not sell any Bitcoin,” he said. wrote Monday.
With Musk against the cryptocurrency community starting to look like a full-blown war, Bitcoin is therefore unsurprisingly volatile as all eyes remain on the Twitter battlefield.
At the time of writing this article, Bitcoin was trading at around $ 44,800, still down 8.7% in the past 24 hours.
As analyst Alex Krueger noted, however, the clarifying tweet may unintentionally act as a local background signal, as Musk posted just as BTC / USD hit a 61.8 Fibonacci retracement level.
“Elon Musk must be an exceptional technical analyst,” he commented.
“His tweet ‘Tesla didn’t sell any Bitcoin’ was posted exactly at Bitcoin’s key technical level, 61.8 fib ($ 42,845).
BTC dominance drops below 40%
Musk’s activities have had a negative impact on Bitcoin and altcoins.
Although it continues to praise Dogecoin (DOGE), even the memes-based token failed to avoid losses over the weekend, with the majority of large-cap altcoins following Bitcoin to the low.
There were smaller losses, such as Cardano (ADA), which on Saturday still exceeded the overall bearish trend to even post new all-time highs.
In terms of the downside, however, there is nothing to show how much the average Bitcoin holder is suffering as market dominance.
Bitcoin’s share of overall market capitalization fell below 40% on Monday for the first time since June 2018.
Already on the way out, dominance has taken a heavy blow thanks to the recent pressure on Bitcoin prices, while alts such as Ether (ETH) have taken advantage.
“Bitcoin’s dominance is still on the decline,” famous Twitter trader The Moon said abstract during the weekend.
“The alternate season is not over yet. But my instinct is that the end is near! “
Bitcoin fundamentals bring calm
Despite all the nerveracking price action, meanwhile, nothing provides a bullish counterpoint to Bitcoin’s current narrative other than its network fundamentals.
Even after falling from $ 42,000, Bitcoin is more attractive than ever to miners, so its network security is also stronger than ever.
As TBEN reported, the hash rate and difficulty have caused a miraculous recovery in recent weeks, recovering all-time highs after a miners slump caused its own brief drop in prices.
The weekend turned out to be no different, with an average weekly hash rate exceeding 180 exhashes per second (EH / s) for the first time.
The difficulty is still on track to increase by over 10% on the next automated readjustment in 11 days. The previous readjustment of May 14, at 21.5%, was the biggest positive change since June 2014.
“Bitcoin mining difficulty reaching an all-time high just after tesla’s announcement is a boss kiss,” Alex Thorn, head of cabinet-wide research at crypto merchant bank Galaxy Digital, mentionned Last week.
The dollar bounces back to support
By taking a break from crypto-specific triggers, the larger macro picture can still provide some inspiration for the price path.
After plunging at the end of last week, the strength of the US dollar is back. The US Dollar Currency Index (DXY) is rebounding from familiar support – increases in its strength tend to create startup problems for BTC / USD.
At the same time, stocks are bullish in China but perform moderately in Europe and the United States. The coronavirus, with peaks localized in some jurisdictions but fewer cases in others, is joining the melting pot.
Among traders, however, it is inflation that is a key issue. A large global rebound from the time of lockdowns and other restrictions is creating problems for those trying to design it – in particular, the US Federal Reserve and other central banks.
“The global economic recovery is well underway; this is what fuels inflation fears, ”Olivier d’Assier, Qontigo’s head of applied research for APAC, told Bloomberg.
After the hectic year of the stock markets, he added, the appetite for profit taking will naturally increase.
Bitcoin still beats its last bull market
Is it 2013 or 2017 in terms of the Bitcoin bull market?
Among the best-known names in the industry, there is no sign of a decline – it remains only to analyze the nature of the current retracement and compare it to past years.
This week, stock-to-flow creator PlanB notes that for all of Musk’s drama, Bitcoin still performs better than it did during its 2017 run to $ 20,000. This despite the fact that the $ 42,000 drop is officially Bitcoin’s biggest this bullish cycle and since the inter-asset crash of March 2020.
“Today looks like a bull market of 2017 (especially during the fork war)”, he said tweeted Monday, recalling memories of the birth of Bitcoin Cash (BCH).
“It’s not a straight line to the next ATH, but a lot of volatility (several drops of -30%). HODL. “
The call for calm and zoom out is a key feature among seasoned Bitcoiners. As TBEN reported last week, stock-to-flow remains untouched by Musk or any other episode of downward volatility.
A support survey Meanwhile, revealed that a majority of 35,000 respondents believe BTC / USD will still hit $ 100,000 this year.