Hello, Market Wrap readers! During the final two weeks of 2021, we’re using this space to recap this year’s most dramatic moments in cryptocurrency markets – and highlight the key lessons from this fast-evolving corner of global finance. Over a series of eight posts starting on Dec. 20 and running through Dec. 30, we’ll recap what shook crypto markets this year. (If you’re looking for today’s prices and news headlines, please scroll down.)
Today, we’ll show additional reasons for widespread selling that occurred in April and May. After bitcoin’s powerful rally to start the year, fueled by fear of fast inflation, some large investors grew concerned about rampant speculation in the almost-anything-goes market and a slowdown in global money supply growth. In fact, some price chart indicators were already suggesting that bitcoin was overvalued. By June, BTC had stabilized at around $30,000, and guess what happened then? Traders bought the dip.
Elon Musk – the billionaire Tesla CEO whose market-moving tweets earlier in the year revealed an on-again, off-again infatuation with bitcoin – sounded a fresh openness to crypto industry dialogue over the Bitcoin blockchain’s electricity usage. Toward the end of May, Musk tweeted that he spoke with bitcoin miners about using renewable energy resources. He wasn’t turning his back on bitcoin completely, which provided some hope for discouraged bulls.
BTC’s price eventually stabilized at about $30,000 in June as extreme selling pressure began to slow. The chart below shows the nearly 50% price drop between April and June. And then, over the course of July and August, bitcoin mostly traded sideways, establishing a new price range as some technical indicators suggested BTC’s price was oversold.
Price movements were far less volatile than they had been in recent months, and it seemed as though many investors still believed in bitcoin’s potential as a long-term store of value. Bitcoin miners claimed to be looking for ways to reduce or mitigate their environmental footprint, and most of the network’s mining power relocated away from crypto-unfriendly China.
A key takeaway was that, despite what suddenly seemed to an unrelenting onslaught of negative headlines for the bitcoin market, the price was holding up remarkably well on a historical basis: The April all-time high of around $65,000 was now looking far away, but so was the 2020 low of around $3,850.
Damanick is a crypto market analyst at CoinDesk where he writes the daily Market Wrap and provides technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also a portfolio manager at Cannon Advisors, which does not invest in digital assets. Damanick does not own cryptocurrencies.
This content was originally published here.