The thing that many seasoned traders and investors had been anticipating for quite a while had finally happened - the biggest rally in the relatively short history of Bitcoin and the whole cryptocurrency market had exhausted itself when BTC had failed to squeeze past $64,000 and began beating its head against the stubborn resistance at $60,000. And as it often happens on the cryptocurrency market, the end to the period of indecision that lasted from early April until the middle of May was quick and brutal.
In a matter of two weeks that followed Bitcoin's last attempt to crack the resistance at $60,000, the price of the dominant cryptocurrency plummeted from $59,400 all the way to $30,000, which constituted a massive 49.7% drop, the biggest since the infamous 2017 crash that led to the three-year-long bear market.
At the moment, BTC finds itself deadlocked inside the range between $30,000 and $38,000, with the bearish pressure being incredibly strong, to the extent that sensational news coming from El Salvador - a small South American nation that became the first to recognize BTC as legal tender - couldn't sway the market in the bullish direction. If that news were to emerge back in March, Bitcoin would have exploded and possibly even broken through that tough resistance, but in current conditions, the bullish price action got limited to a brisk 24% rally that met serious opposition from sellers around the $38,000 area.
1-day BTC/USDT chart. Source: TradingView
While the cryptocurrency market remains in the state of FUD (fear, uncertainty, and doubt), perhaps it's time to sit back and analyze the reasons behind maybe the biggest drawdown in the history of crypto because those same catalysts will keep exerting serious influence on the market in the near future. Therefore, it's vital to understand who is pulling strings and where the main pain points are, and most importantly, whether the market holds the promise of getting back to bullish ways. Otherwise, all those laser eye profile pictures on Twitter, which signify the person's support of BTC's highly anticipated run to $100,000, would have to be taken down indefinitely.
Before Elon Musk emerged on the crypto scene, there hadn't been such a powerful player whose single Tweet could rattle the markets. The crypto community had a tight circle of influencers that included Mike Novogratz, one of the biggest Bitcoin proponents and a former manager of the hedge fund called Fortress Investment Group; Barry Silbert, the founder and CEO of Digital Currency Group, Brian Armstrong, the founder of Coinbase, and Vitalik Buterin, the person who brought us Ethereum. All of them literally have armies of followers across all social media who heed every word coming from the influencers. But none of them have the weight to push the markets in either direction with a single tweet. Then came Elon Musk, a genius tech entrepreneur who gave the world PayPal, SpaceX, and Tesla.
Most of you probably remember that the halted bull run started with the groundbreaking announcement from PayPal about the incorporation of four cryptocurrencies: Bitcoin, Ethereum, Litecoin, and Bitcoin Cash, to its global payment service. And while it had only an indirect relation to Musk, that was the time when his voice became especially profound and impactful.
It gained even more weight in early February when the Tesla corporation revealed in its filing to the SEC that it had bought $1.5 billion worth of Bitcoin and began accepting the first cryptocurrency as a means of payment for Tesla cars and other products. That announcement propelled the price of BTC from $36,000 all the way to $58,000 and made Elon Musk the crypto community's favorite billionaire and have his words the power to be reckoned with.
For some time, everyone didn't pay much attention to the fact that a single person had mustered so much media power, while the mogul and a bunch of music celebrities were playing around with Dogecoin (DOGE) sending its price to the Moon with a series of silly memes. In fact, everyone who had invested even a few hundred bucks in the meme coin was ecstatic about such developments, urging Musk to help push its price to $1. There was even a joke circling around the crypto traders community that Elon Musk had rendered technical analysis obsolete because, at that time, it didn't matter whether Bitcoin is posting a bullish flag or a descending triangle, or what the trading volume profile was at a certain period, the price showcased significant moves to the upside when Musk posted something like the Bitcoin hashtag in Twitter bio or changed his profile picture to an anime girl with laser eyes.
Those were the fun times, but Elon's honeymoon with the crypto community ended on May 12 when the billionaire made a controversial announcement about Tesla suspending Bitcoin payments due to rising environmental concerns.
"We are concerned about the rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel. Cryptocurrency is a great idea on many levels, and it has a promising future, but it cannot come at great cost to the environment."
Musk also added that Tesla doesn't intend to sell Bitcoin that it already had on the books and would reinstall BTC payments as soon as the mining gets "greener." Needless to say that this announcement sparked a heated debate and almost instantly turned the darling of the crypto world into a hypocrite and villain. As they say, there is always a thin line between love and hate, especially if the "loved" one stabs everyone's favorite digital asset right in the heart and makes it bleed. And Bitcoin had indeed bled profusely after Elon's unexpected and controversial announcement as it shed 16% of value in less than 24 hours.
Many of Musk's supporters- turned-foes are accusing the billionaire of hypocrisy, arguing that Tesla cars are utilizing the same electricity obtained from fossil fuels and that electric cars in general, with Tesla being the most popular of them, are also subtly polluting the environment in other ways. Also, the lithium that is widely used to produce electric car engines usually comes from mines that deal considerable damage to the environment.
For instance, miners at the Jiangxi mine in China use tons of highly toxic ammonium sulfate that is mixed with the clayish soil when extracting rare metals like lithium - more than 90% of this chemical substance remains in the ground polluting the environment. Other mines utilize sophisticated rock-drilling equipment that eats up immense amounts of electricity and also use coal furnaces to conduct the baking process. Therefore, even though Tesla, as a final consumer product, is considerably greener than the conventional fuel-consuming cars, it's far from being fully divorced from fossil fuels and the damage that they are causing to the environment.
Pinning the blame on Bitcoin while your own pride and joy isn't that innocent is indeed hypocritical. Besides, many believe that Musk's sudden change of stance on Bitcoin had a lot to do with the prospect of losing a very lucrative earning stream from selling regulatory carbon credits, which constitutes over 6% of the corporation's revenue. Several reports suggested that Tesla stands to lose the contract with Groupe PSA, the second-largest car manufacturer in Europe, since it's about to become carbon compliant. The official reports suggest that Tesla's financial results in the last quarter were positive ($438 million in net income) solely thanks to the sales of carbon credits and a partial sale of the aforementioned position in Bitcoin. It is said that the company had dumped $101 million worth of BTC, which catalyzed the price fall.
On the one hand, Elon Musk accuses Bitcoin of contributing to environmental issues, but on the other hand, his company is profiteering from selling the rights to pollute the environment, which is the idea behind carbon credits, while maintaining the positive quarter by dumping a considerable chunk of BTC position onto the market, causing a flash crash. But even though Elon Musk has been abusing his power over the market, he didn't force anyone's hand to panic sell BTC when the market began going south.
After all, someone's influence goes only as far as the other party is willing to accept and act on it. Hopefully, this episode would serve as a wake-up call to the crypto community - no one, not even one of the richest people on the planet, should have such a profound impact on the thing that is inherently decentralized, thus has no central authority. In the long run, the cryptocurrency market would devour the likes of Elon Musk and "paper hands" traders who dump their positions at someone else's bidding, while the community needs to start having a semi-deaf ear to those who think that they can first mount and then undermine such a revolutionary and generally positive thing as Bitcoin and cryptocurrencies in general.
In conclusion to this chapter, allow us to debunk a bit the myth about Bitcoin's ravenous appetite for electricity and its "unbearably harmful" impact on the environment. According to research conducted by the Cambridge Center for Alternative Finance, Bitcoin mining consumes approximately 145 TWh of electricity on a yearly basis, which constitutes only 0.59% to 0.65% of the overall consumption across the world. At the same time, other studies suggest that the Bitcoin network uses up only 75 TWh of electric energy per year - such a considerable discrepancy shows the lack of standardized methods for calculating the exact damage to the environment caused by PoW mining. But even the highest estimates show that Bitcoin consumes a minuscule volume of electricity, especially when compared to the power used to sustain, for instance, the bloated military forces or produce the mind-numbing reality shows.
Another research carried out by the same Cambridge Centre for Alternative Finance reveals that around 40% of PoW mining utilizes renewable energy that comes mainly from hydroelectric facilities, with the prospects for increasing two-fold in the near future. Other reports, like the one provided by CoinShares Research, claim that the share of renewables actually goes as high as 74%, while those mining pools that do use the electricity derived from fossil fuels usually buy the surplus power from local grids that would go to waste if not for the miners.
Naturally, the biggest global media outlets had picked up on Musk's statement and began spreading the partially false narrative, thus only exacerbating the bearish sentiment on the market, which pushed the price below the long-standing support at $45,000. It's obvious that Bitcoin critics would keep on dragging out the environmental and electricity consumption issues until Bitcoin mining becomes totally green, a feat that could be achieved within the next decade if the current trend in the use of renewables continues. But it all boils down to the question of relative benefit - the PoW mining would inevitably consume more and more energy as the underlying blockchain network expands; it could even double in the next few years. But isn't 1.6% of global electric power a fair price to pay for the development of revolutionary technology that has the potential to give access to basic financial services to millions of unbanked and underprivileged people across the globe? We deem this question as rhetorical.
Nevertheless, the Musk controversy, and the subsequent market downturn, could have been just an unfortunate episode in the crypto market's bull run. After all, Bitcoin had seen 30+% pullbacks on its road to $64,000. But, unfortunately for those who hoped for a quick rebound and bet long on BTC, another blow had arrived from the different corner of the planet, the country that accommodates over 70% of global hash power, the People's Republic of China. That blow has proven to be so powerful that Bitcoin and the rest of the cryptocurrency market experienced the biggest crash since 2018 as over $1 trillion of its capitalization from before the said events had evaporated within a few short days.
As already said, the cryptocurrency market could have handled Elon Musk's shenanigans, recuperated after the violent drop, and kept on chugging to the upside towards a $75,000 area, which many predicted to be the next point of resistance on the way to the ultimate goal of reaching the $100,000 mark. But as if by some fatal coincidence, the Chinese financial regulators announced that they were banning banks and all online payment outlets that operate in the country from offering any services related to cryptocurrencies. The ban was imposed on such operations as registration and trading on any online exchange platform, along with a prohibition on clearing and settlement operations.
The regulators explained that such a drastic measure was caused by the speculative nature of cryptocurrencies that is "seriously infringing on the safety of people's property and disrupting the normal economic and financial order." To some relief of cryptocurrency enthusiasts in China, the government didn't prohibit them from holding actual digital currencies, at least for now. The said announcement was made by China's three leading financial institutions, namely the Payment and Clearing Association of China, The National Internet Finance Association of China, and the China Banking Association. In this joint statement, the institutions declared that they wouldn't be offering any saving or trust services, as well as financial products that are in any way related to cryptocurrencies.
This was actually the expansion of the first crypto ban that had been imposed by the Chinese authorities back in 2017 when Bitcoin was going through its first bull market. Under those restrictive measures, Chinese retail traders and investors had been indefinitely denied access to both domestic and foreign cryptocurrency exchanges, which was one of the reasons why Binance had fled from that jurisdiction, as well as websites that conducted Initial Coin Offerings (ICOs). Many believed that the initial ban was one of the reasons behind the infamous market crash in 2018 that resulted in the notorious bear market dubbed the "crypto winter" that lasted for almost three years because, at that time, nearly 90% of all BTC and cryptocurrency trading activities were concentrated in China.
As a consequence of such draconian measures, 88 online trading platforms were forced to leave the Chinese jurisdiction, along with 85 online resources that supported or organized ICOs. Ironically, back in 2013, the People's Bank of China (PBOC) had recognized Bitcoin as a virtual commodity and introduced fairly relaxed regulations with regard to cryptocurrency trading. But, once the regulators realized that cryptocurrencies are used as an efficient tool by high net worth individuals to conceal their capital and transfer it abroad, where the regulators couldn't detect and confiscate it if such a necessity had arisen, their stance on crypto had changed dramatically. Basically, the needle that had popped the "crypto bubble" of 2017/2018 was made in China. And while the (hopefully) ongoing bull market has little to no signs of being a bubble since it's fueled mostly by large financial institutions like MicroStrategy and Grayscale Investments that have been openly or covertly buying out almost the entire supply of BTC that had been mined in the past six months, the impact that the second ban had been almost equally harmful.
On May 13, when the news regarding the freshly imposed ban began to circulate around the global media, the price of Bitcoin started to spiral downward like an Olympic diver. In a span of four days after the restrictions had been officially imposed, the Bitcoin price had collapsed from the interim support at $50,000 all the way to the macro support level at $30,000 - a 41% decline - which was, fortunately, successfully protected by the buyers.
Upon that violent drop, BTC had posted a quick 40% jump to the upside and tested the $42,000 zone, but the bullish initiative was quickly extinguished by the bears, which led to the price rapidly descending back to said support zone between $30,000 and $32,000 and then going into a range. It's still unclear whether the market would be able to recover after being hit with such a devastating one-two combination from the power brokers of this world. Despite the immensely positive news coming from El Salvador, the first nation that has officially recognized and embraced Bitcoin as legal tender, which raised the wave of optimism in the crypto community, the price of the first cryptocurrency is still unable to pose a significant threat to the overhead resistance at $40,000.
Perhaps the reason why Chinese authorities got a much firmer grip on cryptocurrencies lies in the government's ceaseless, and mostly successful, efforts to maintain the lead over the United States in the race to become the first country to introduce the proprietary central bank digital currency (CBDC) that is often referred to as digital yuan or digital renminbi. It's a common practice in totalitarian states to eradicate even the slightest competition to the "party agenda," even if it means stripping the citizens of access to the most progressive technological solution of the decade that could give them more financial freedom. So much for the people's state. But if you are a global superpower that sees central bank digital currency as an opportunity to challenge the status of the U.S. dollar as a global reserve currency, such trifles as giving people control at least an illusion of control over their money is unacceptable, that's why crypto has been under so much scrutiny in China that is likely to linger unless the local Bitcoin mining pools, which, as already mentioned, are concentrated in that country find the way to relocated their facilities to safer, cheaper, and "greener" pastures.
The development of the digital yuan began back in 2014 when the newly emerged cryptocurrency caught the attention of Zhou Xiaochuan, the top executive who was the head of the PBOC at that time. For several years, the Chinese financial elite managed to successfully conceal its intention to introduce blockchain-based digital money. Instead, the focus was directed on the development of virtual infrastructure for the future CBDC. And while the realization that modern society is bound to be cashless came to the Western bankers only when the COVID-19 pandemic had spurred the economic crisis, the Chinese had been successfully adopting cashless payments via widely popular mobile applications like Alipay and WeChat. Nowadays, you would rarely see someone paying for goods or services with cash in China - every payment goes through the said apps. It might seem very convenient because one doesn't need to carry a wallet or even a money clip around - a smartphone with a registered WeChat account would be sufficient to shop around even in the backwater provinces of that vast country. But, as it always happens with such regimes, the ephemeral convenience comes at a price like privacy and relative freedom of capital flow.
China's efforts to introduce digital yuan were expedited by Facebook's pursuit to develop its own cryptocurrency that was clamped down by the U.S. Senate, which feared that the new digital money might threaten the position of the dollar as a global currency. Besides, the Chinese want to present their CBDC as a way to circumvent economic sanctions that were generously imposed by the U.S. government on many countries. As of now, over 250 Chinese companies and government officials are on that sanctions list, not to mention those from North Korea, which, as rumor has it, had been secretly funding the development of digital yuan for their own benefit.
In the meantime, the Chinese financial authorities had successfully carried out a series of trials of digital renminbi in the form of a lottery which saw the government handing out 40 million yuan to citizens of Beijing. The money was given away in red envelopes, the traditional packaging for monetary gifts in East Asian countries, to the registered users of two banking applications, which they could have spent in selected online and brick-and-mortar shops. Similar trials had been carried out in Chengdu and Shenzhen, where people were handed the same amounts of money in CBDC. Back in April, Li Bo, one of the highest officials in People's Bank of China, revealed that the government is preparing the gateways that would allow foreign tourists, who are expected to flock to the country to witness the 2022 Beijing Winter Olympics, to obtain digital yuan and use it for payments within the country.
Upon analyzing these facts, it becomes clear that the recent crackdown on cryptocurrencies has much deeper reasons than just the concern about the safety of citizens' property. It is obvious that the real reason lies in Bitcoin's capability to disrupt the "normal" economic and financial order, especially given that the Chinese government is actively trying to establish itself as the leader of the future financial system, which will undoubtedly be digital and cashless, and even shape the new financial order.
And under that order, which would surely be based on total control and the absence of any financial freedom, there would be no place for Bitcoin, not to mention privacy coins like Monero, ZCash, or Dash. Right now, the only way to strip the Chinese government of its leverage over the cryptocurrency market that causes the parabolic crashes that we have witnessed over the past several weeks is to incentivize Bitcoin miners to relocate to other countries that have a much more relaxed stance on digital currencies - Canada and El Salvador are the first that come to mind.
When it comes to "influencers" like Elon Musk, the crypto community would simply have to learn to take his and other's words with a grain of salt and not buy into the concepts of "meme economy" and "trading off Elon's tweets." This crisis presented a valuable lesson for all of us - the crypto space is still immature and prone to serious downturns due to the centralized nature of mining facilities. But if Bitcoin manages to recover after such a harsh blow and get back to being charged with bullish energy, there would be practically no barriers on its way to $100,000.
|#||Crypto||Prediction||Accuracy||CVIX||Price||24h||7d||Market Cap||7d price change|
|1||BTC||Bitcoin predictions||93.2%||9||$27 087.02||-0.27%||-0.06%||$525 275 860 361|
|2||ETH||Ethereum predictions||90.4%||5||$1 894.54||-0.31%||2.56%||$227 788 525 796|
|3||USDT||Tether predictions||95.6%||1||$1.000266||0%||-0.02%||$83 174 583 635|
|4||BNB||Binance Coin predictions||92.8%||3||$306.22||-0.05%||-0.74%||$47 726 034 527|
|5||USDC||USD Coin predictions||95.6%||1||$0.999950||-0.01%||-0.02%||$28 902 979 509|
|6||XRP||XRP predictions||77.6%||45||$0.523003||0.07%||10.63%||$27 189 376 584|
|7||ADA||Cardano predictions||94.8%||5||$0.379137||0.78%||2.17%||$13 229 654 737|
|8||STETH||Lido stETH predictions||93.2%||1||$2 941.39||-0.40%||-3.32%||$10 258 752 564|
|9||DOGE||Dogecoin predictions||91.6%||10||$0.072900||0.75%||0.19%||$10 178 444 950|
|10||SOL||Solana predictions||82%||26||$21.28||0.54%||4.16%||$8 445 521 119|
|11||MATIC||Polygon predictions||84.4%||24||$0.902754||0.60%||-2.77%||$8 377 081 385|
|12||WTRX||Wrapped TRON predictions||79.6%||41||$0.081565||-3.18%||5.43%||$8 293 183 944|
|13||TRX||TRON predictions||75.6%||46||$0.081676||-3.05%||5.19%||$7 366 637 548|
|14||LTC||Litecoin predictions||79.6%||43||$95.13||0.59%||6.20%||$6 951 023 390|
|15||DOT||Polkadot predictions||90.4%||7||$5.33||1.27%||-0.64%||$6 346 171 816|
Get cryptocurrency price predictions, forecasts with analysis and news right to your inbox.
© 2015-2023 Crypto-Rating.com
The usage of this website constitutes acceptance of the following legal information. Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website, including information about the cryptocurrencies and bitcoin is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Crypto Rating shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about cryptocurrencies. The entire responsibility for the contents rests with the authors. Reprint of the materials is available only with the permission of the editorial staff.