Yesterday, the price of Bitcoin experienced a significant drop.
But today, it appears that the crash has temporarily stopped, or at least the acute phase has stopped.
To fully understand what’s going on, we recommend first analyzing the crash and then looking at what’s happening today.
Bitcoin crash
The recent Bitcoin price crash actually started on Wednesday, when it fell below $75,000.
Initially, it didn’t seem like much was going to happen, especially since the stock had rallied to $76,000 after falling to $73,000 the previous day.
However, Wednesday’s decline was driven by factors that continue to push prices lower. $BTC The next day, that is, yesterday.
At one point, the price fell to $72,000, and after failing to rebound, it fell to $70,000.
However, the real collapse had not yet begun. Opening of the US stock market.
In essentially just 14 hours, it plummeted from $71,000 to $60,000, one of the steepest declines in recent years.
In percentage terms (-16%), this is not one of the worst declines. $BTChistory, but definitely one of the worst in recent years.
If the 16% drop occurred during the acute phase, which lasted 14 hours, that would mean a 21% drop in just over a day after the decline began. Since then, the stock has made a small rebound of +8% from the low, but so far it has not been enough.
Causes of today’s Bitcoin crash
However, the cause of this crash is not found in any hypothetical problems with Bitcoin itself.
In fact, this decline appears to have been driven by factors, among others: General fear that exists in the American market.
In fact, the VIX index, often used as a barometer of fear in traditional U.S. markets, has already marked its first peak above 20 points on Monday, followed by an even smaller peak on Tuesday and an even smaller peak on Wednesday.
In all three cases, Although the price of Bitcoin was falling, VIX rose slightly yesterday. It soared from less than 19 points to nearly 22 points in less than a day and a half, causing panic, especially among high-risk assets.
The S&P 500 index ultimately fell 3%, and the U.S. private equity sector fell 4% during the same period.
In other words, fear is concentrated in high-risk assets, with large but more muted losses in medium-risk assets such as major U.S. stocks.
In fact, Bitcoin has been hit the hardest because it is an asset with significantly higher potential risk compared to stocks and private equity.
It’s worth noting that private equity is down nearly 11% since mid-January, while Bitcoin is down 32%.
mini rebound
After yesterday’s crash, mini rebound It was expected.
For now, it’s actually just a very small technical rebound after marking a new local bottom, but it could extend into at least Monday.
No one knows whether this technical pullback will continue for a few more days or give way to further declines, but with VIX index futures slightly lower today (less than 21 points), fears appear to be subsiding for now.
To be honest, the rebound hypothesis was already circulating yesterday. Bitcoin’s crash was similar to November’s crash, which ended at $80,000 on the 21st.
At the time, the stock had rebounded 17% from its local lows after a 10-day decline, with yesterday marking its seventh day of decline. Therefore, although the parallelism is imperfect, the two trends are very similar in terms of the extent of the decline, albeit with slightly different timing.
For the current mini-bounce to turn into a real rebound, Bitcoin would need to rise to around $66,000 today after US markets reopen and return to $70,000 by Monday.
reason for fear
The reason behind yesterday’s rise in fear (VIX) is not clear and obvious.
However, as my fear became concentrated, high-risk assets; Medium-risk ones can also cause minor damage while leading to future expectations.
Anxiety over changing economic and financial conditions in the United States may have played an important role, especially in light of recent political developments.
At first glance, the economic outlook appears favorable in the short to medium term, but when medium- to long-term geopolitical risks are taken into account, the situation is by no means rosy.
The risk is that the situation in the United States could worsen in the coming months, especially as the November midterm elections approach.
At this point, Trump’s Republican Party appears to be at a significant disadvantage, and a landslide victory for the Democrats could put Trump himself at risk of impeachment. Unfortunately, recent statements by Mr. Trump and Mr. Bannon raise the potential risk that the U.S. government may use coercive measures to try to persuade, or even “coerce” American voters to vote Republican.
If such a scenario, which is currently only a hypothetical, materializes, it is very likely that fear will turn into pure fear, as it would mean the end of democracy in the United States (it must be kept in mind that the United States is the world’s largest economy and military power).
