Bitcoin is winning its positions back
27.04.2021 | auglovoi
Last week did not go well for bitcoin and a number of altcoins. After setting another all-time high above $63 000, quotations fell below $49 000, which amounted to a decrease of more than 20%. At the same time, a number of other cryptocurrencies, on the contrary, showed positive dynamics. While digital gold was at the bottom of local lows, ethereum was breaking new records above $2 600.
Reasons for such performance.
In fact, bitcoin’s fall was caused, as in most cases of sharp jumps in online exchanges in any direction, not so much by fundamental reasons, but by the information background in the U.S. financial market. President Joe Biden’s administration announced an increase in the capital gains tax, which led to the liquidation of a large number of mid-sized positions to buy and sell digital gold by big players. This, in addition to increasing supply in the market, triggered two waves of long-swaps, which only accelerated the decline.
At the same time, problems in the mining market, where losses the bitcoin network hashrate was over 25%, and momentarily reached 40%, led to increase fees when transferring the first cryptocurrency. And so, especially among those who use cryptocurrency as a means of payment, they had to look for alternatives. This is what led to the growth of etherium on the one hand, and allowed altcoins to show slightly better dynamics compared to the flagship.
Thus, these two factors came together. Because of the high fees, demand for bitcoin has fallen, and the tax rate increase has thrown a large number of coins onto the market.
There will be a recovery
But it will take some time. In the current situation, we can’t talk about a bitcoin price recovery anytime soon. Right now, the best solution would be to invest in digital gold for a period of at least one or two years. In the shorter term, the first cryptocurrency is still capable of falling to $43 000, with a fairly rapid rebound to the current states. That said, it is worth closing all short positions when the $56 000 breakout, which is a technical resistance, and is close to the psychological $55 000.
For traders at the moment, it is not a good idea to use large leverage and have enough liquidity in the account to wait out sharp fluctuations. Most investors are now opening long positions, which can provoke hard-to-predict spikes that would violate even the most accurate predictions if there is a squeeze on the position due to insufficient collateral.
These articles are for informational purposes and are not investment advice or guarantees.