Over the past seven days, the cryptocurrency’s market cap has decreased by $510 bln, to $2.05 trln. Two news items triggered profit-taking on long positions. Firstly, the US Treasury Department may soon accuse a number of financial institutions of using digital assets to launder money. Secondly, there was a 40% collapse in the hash rate due to a massive power outage in the Chinese province of Xinjiang. Sellers pushed the price action down to $46,930 during the first bearish impulse wave.
On May 12, the second blow to Bitcoin was struck by Elon Musk. He tweeted that Tesla would no longer accept Bitcoin for EV purchases. The bears sank the price to $46k on this news.
After that, the price action hovered around $49k for three days. The downturn spilled over to Sunday, May 16, and on May 17, it picked up to $42,196. The price action took a hit as players assumed that Tesla had unloaded its remaining BTC holdings after Musk’s tweet. Musk later issued a disclaimer, which helped bitcoin revert to a correction.
Then on Tuesday, May 18, negativity rolled in from China. China banned financial institutions and payment companies from providing services related to cryptocurrency transactions. The China Banking Association, the Internet Finance Association and the Payment and Clearing Association recommended that citizens refrain from investing in cryptocurrencies and reminded that such transactions are not protected by law.
A slew of negative news has weakened Bitcoin by 40.5%, from a high of $64,854. Buyers first surrendered the $53,000 level, then $46,000 and $42,000. In early morning Wednesday trading, sellers dropped the price to $38,550. Bitcoin is currently trading at $40,604 up from its intraday low of $38,500.
The support level is between the $39,500 and $37,000. Buyers are waving a white flag en masse, so sellers with a blank order book could reach $33,700. Over the past 24 hours, Bitcoin longs worth $794 mln have been liquidated.
According to recent media reports, investors have been moving tokens from cold wallets to exchanges (a canary in the coal mine?). Markets are already seeing low liquidity. So, if the crowd rushes into a sell-off, a roller coaster could pop up in front of us, after which an early crypto winter will likely set in.