After the crypto crash: That’s why Bitcoin could slip well below the $30,000 mark

taketonews

• Terra crash and fear of interest rates weigh on crypto courses
• “Death crosses” in the BTC chart suggest a correction
• Course can be halved

Bitcoin & Co. in a downward trend

Recently, the cryptocurrency market has been under significant pressure. While the largest cyber currency weighted by market capitalization, Bitcoin, still marked an all-time high at USD 68,789.63 in November 2021, the price of the crypto currency has continued to plummet since then and was last listed at USD 30,453.17 (as of January 2021). May 30, 2022). The situation is similar with competitors such as Ether, Ripple and Cardano.

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Terra crash and fear of interest rates spoil the mood for crypto investors

One of the reasons why the market for digital coins has recently been under stress is the collapse of the stablecoin Terra UST. The cryptocurrency is linked to the value of the US dollar, which is intended to prevent strong price fluctuations, such as those observed with Bitcoin, Ether & Co. Terra UST is also an algorithmic stablecoin that works in conjunction with a second cryptocurrency. This is the digital currency LUNA. If, for example, new amounts of Terra are thrown onto the market, units of LUNA must be disbanded and vice versa. So the dollar price should be modeled. But if the US dollar collapses, there will also be a sharp drop in the Terra course, which LUNA has to compensate for. Numerous new LUNA tokens will be created within a very short time – as was the case at the beginning of May. The price of LUNA suffered as a result, and the token is now almost worthless. The Terra blockchain has been decoupled from the US dollar as a result of the depreciation and is now out of service. With Terra 2.0, however, the developers want to eradicate the previous errors, and the new version should start soon.

Even if the price drop does not affect crypto heavyweights like Bitcoin, the incident showed how quickly a total loss of value of a cyber currency can occur. Accordingly, the courses of other digital currencies have also given way since the LUNA crash. In addition, crypto investors are also concerned about rising interest rates, which are further fueling the crypto market’s downward spiral.

“Death crosses” bode ill for Bitcoin

However, the end of the road is far from being reached, according to the “Rekt Capital Newsletter”. In a case study shared by the publication’s author on his Twitter profile, the Bitcoin chart was examined for its “death crosses” in the past. The term refers to the point in time at which the moving average for the last 50 days falls below that for the last 200 days. In the chart image, the two lines cross over.

According to research by Rekt Capital, such death cross cycles have occurred several times over the past ten years, resulting in a stronger correction. In 2013, for example, bitcoin price fell about 70 percent after such a cross, followed by 65 percent in 2017 and 55 percent in 2019 after such death crosses appeared.

Countermovement: BTC 2020 and 2021 with a price increase despite death crosses

However, there are exceptions to this rule when looking at price movements. In the chart shared by Rekt Capital, death crosses can also be seen in 2020 and 2021, but in contrast to the previous price slumps, Bitcoin actually rose in these cases.

Recovery rally unlikely

Nevertheless, these observations should actually be exceptions, as Rekt Capital further explains. This is supported by the fact that Bitcoin has recorded a big minus of around 40 percent since the beginning of the year and there has been no countermovement so far. The decisive factor now is how clear the correction has been since the last crossing of the 50 and 200 lines in January 2022. “So since #BTC has tumbled -43% since Nov ’21 before the death cross…$BTC could retrace a little further to achieve an overall -43% drop after the death cross should this historical trend continue to repeat itself ‘ the tweet said. In this case, a Bitcoin course of 22,700 US dollars can be expected.

Historically, however, the correction could also be much more drastic: with a minus of 55 percent, the Bitcoin price would fall to around $18,000, while a 65 percent correction would result in a value of $13,800, according to the author. If the slump were even 71 percent, this would even push the Bitcoin to 11,500 US dollars.

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Image sources: Andrey Burmakin / Shutterstock.com, Dim Dimich / Shutterstock.com



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