The Crypto Crash: Do We Need To Worry?

The Crypto Crash: Do We Need To Worry?

Bitcoin’s price is stabilising today after its wild swings yesterday. Investors had their reminder that cryptos are a special kind of beast when it comes to their volatility, and no other asset class can come close to it. Despite the fact that we saw some serious heavy selling and many investors and traders were shocked at the price, wondering what had happened to the crypto market, Bitcoin’s price is still up more than 200% from its September high.

There is no doubt that a lot of bargain buying happened yesterday as the fall in the Bitcoin price and other cryptocurrencies was extremely dramatic, and a lot of the top coins by market cap had their bargain alarm bells ringing. However, the sell-off may not be over, and this is a concern among certain investors. This is despite the fact that the RSI on the daily time frame for Bitcoin and Ethereum is clearly showing that prices are very oversold. In fact, the RSI hasn’t shown this kind of reading in several months. So, from a technical price point, it certainly makes sense that one could be buying some really cheap assets.

On the fundamental side, things have changed dramatically, and there are some really important points that investors need to pay attention to. Firstly, a major fear is that the recent sell-off in the crypto prices wasn’t on the back of any significant news. Yes, it is true that we had more adverse news from China, but one needs to check things properly and study the past behaviour. China never said that it would be allowing Bitcoin as a cryptocurrency; it never favoured Bitcoin as a currency of choice. In fact, the country is very close to finalising their own digital currency, which just like the fiat currency, will be controlled by the central bank.

Thus, it is clear that the sell off is about other external factors and not just the Chinese regulatory news.

The other narrative which has been very popular and associated with the recent decline in the crypto is that Elon Musk doesn’t seem to be a fan of Bitcoin. Recently, he announced that Tesla would no longer be accepting Bitcoin as a form of payment. Then there have been rumours that Elon Musk may have sold all of Tesla’s Bitcoin position. Of course, that wasn’t the case as he himself cleared up that false speculation. Tesla’s entry into the crypto world i.e. in Bitcoin, was really important news for the industry. There were some strong hopes that perhaps we will continue to see several other US corporates diversifying that Treasury system by allocating some portion of the capital to Bitcoin. Tesla’s loss of confidence in Bitcoin has certainly influenced other companies’ decisions as well. We may not see any positive news anytime soon but US corporations do still seem determined to diversify their treasury system by investing in Bitcoin.

In addition to that, bitcoin’s wild move served as a further reminder for anyone who is looking at Bitcoin at how intense the volatility can really be. No company wants their Treasury account plunging by nearly 40% in one day. Hence, it is still too early for companies to seriously think about investing in Bitcoin just for the sake of diversifying their Treasury system.

One major fundamental that matters the most when it comes to Bitcoin now is if we are going to see any change in narrative from one of the major Wall Street Giants who are looking to operate in the cryptocurrency space. As of yesterday, things are still looking promising in terms of Bitcoin’s future. That is because we heard from Wells Fargo who want to set up their crypto operation for their clients.

The bottom line is as long as we do not see any of the major institutions back pedaling from the division narrative on Bitcoin, it is highly likely that the crypto winter may never not be coming anytime soon. However, any change of heart among one of the major Wall Street giants could change the game altogether.