TradingView Analysis

Bitcoin Plunges Below $30K, What Comes Next?

On July 20, 2021, Bitcoin dropped below $30,000 for the first time since June 22 dragging other digital assets lower. Nearly $98 billion was wiped off the whole crypto market in 24 hours as of 12:29 a.m. ET on Tuesday, based on data acquired from CoinMarketCap. Bitcoin was down over 6% while Ether lost about 9% and XRP dropped by 10%.

The drop in bitcoin came after a major sell-off in global stock markets. On July 19, the Dow Jones Industrial Average recorded its worst day since last October. A partner at crypto financial services firm Amber Group, Annabelle Huang, stated:

“There’s been a broad sell-off in global markets, risk assets are down across the board.”

There are worries about the strength and quality of economic recovery and wider risk assets turned weaker including high yields.

“Coupled with recent BTC (bitcoin) weakness, this just sent the crypto market down further.”

Since BTC’s all-time high of almost $65,000 in mid-April, its price has dropped by more than 50%.

Regulatory Review

A renewed crackdown in China on crypto trading and mining has increased the pressure on bitcoin markets. Major regions that accounted for a lot of bitcoin mining activities in China have compelled operations to shut down. BTC mining is an energy-intensive procedure that supports bitcoin transactions and the creation of new coins.

China’s central bank has also warned finance and fintech firms not to offer any crypto-related services to clients. The county banned local crypto exchanges in 2017 making them move their operations offshore. This move never stopped the Chinese traders from acquiring and selling digital coins.

But the severe actions in 2021 from the Chinese authorities have looked to tighten guidelines and restrictions on mining and trading. The founder of crypto-focused venture capital and trading firm Kenetic Capital, Jehan Chu, stated:

“All signals are red as BTC (bitcoin) continues to be weighed down by China’s ultimate crypto ban and worsening macroeconomic conditions from a surge in covid variants.”

Regulators throughout the world are also reviewing the crypto space more closely. The world’s biggest crypto exchange, Binance, was barred by the UK authorities in June from conducting any regulated activities in the nation. In Canada, Japan, and Thailand, regulators have also issued stern warnings about Binance.

The lead of business development at crypto exchange Luno said:

“In general we’re seeing more regulatory focus on crypto and bitcoin.”

Is There More Selling Ahead?

Bitcoin dropped below $30,000 and analysts are divided on where the crypto will go next. Some say that the drop below $30K might open the drop for more drops to the $22,000 levels. From then bitcoin may range between $22K and $24K. Ayyar said:

“I would see bitcoin between 20-40K ($20,000 to $40,000) for a while now before any bullishness returns.”

Kinetic Capital’s Chu sees some possible selling ahead. Chu added:

“Q1′s crypto market momentum has stalled and is threatening further reversal potentially below the $25K levels.”

On-Chain Data Suggests Accumulation Is Brewing

Despite the bitcoin markets plunging below $30,000, on-chain data indicates accumulation may be underway, as $1 billion worth of BTC exits exchanges every month. The on-chain metrics suggest that whales may be constantly accumulating bitcoin.

Based on Glassnode’s July 19 “The Week On-Chain” report, the BTC reserves of centralized exchanges have continued to disappear despite the recently sustained bearish momentum, with an average of 36,000 bitcoin leaving the exchanges each month.

Glassnode says that the shrinking BTC reserves on exchanges are an indication that large investors are moving BTC into secure storage, instead of leaving their coins on exchanges in preparation for selling.

Bitcoin net position change on exchanges: Glassnode

Glassnode also said that the recent increase in the number of entities holding bitcoin since May has increased from about 250,000 to nearly 300,000 today. The firm describes an entity as a unique on-chain cluster of associated addresses.

This on-chain analytics provider said that the number of ‘sending entities’ has dropped by about 33% from 150,000 to 100,000, while the ‘receiving entities’ have increased by 20% from 190,000 to nearly 250,000 over the same period.

Bitcoin changes in on-chain entities: Glassnode

Despite the strong signals showing that there is some accumulation in the market, Glassnode said that there is a heavily divided market sentiment. That predicts extreme volatility might be imminent for the markets:

“We have an extremely divided market, and one with a likely expansion of volatility just around the corner.”

Glassnode added that miners are now also in accumulation mode despite the expenses incurred in the major migration in the wake of China’s mining crackdown. The miner net position change metric indicates that over 3,300 BTC per month are being accumulated.

Since bitcoin peaked in mid-April, the bears seem to be in control of the market. Analysts say that the drop below $30,000 might accelerate a move downwards. Some say that the next strong support is located at $24K, $22K, and the 2017 high of $20K. Will the bulls regain control or will more losses take a hold of the market?

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button