Another week and more bad news about Bitcoin’s price are piling up. In the middle of a few dips that have taken the price well below $40K, Bitcoin unexpectedly blew past several key support levels, dipping under $30,000 for a moment before regaining ground. It was a week to forget for Bitcoin investors and fans, bringing extreme fear to the Fear & Greed index at the moment.
What’s next for the cryptocurrency? No one knows at the moment. It could be the darkest night before just before the dawn, or it could spell further drops that will push millions of people out of the market. One thing’s clear – the window for a May price hike is closing soon unless a miracle happens in the coming days or weeks.
What’s Behind the Recent Declines?
There’s not a single factor driving the current declines. Analysts have cited numerous key market drivers as the culprits including high benchmark rates and the asset sell-offs accumulated during the COVID-19 pandemic. While crypto should grow and sell independently of other assets, it has been ‘riding’ together with gold and the financial sector in recent times. The (still) ongoing war between Russia and Ukraine isn’t helping things, as traders and investors are feeling the effects of global recession and sky-high inflation concerns.
Monetary tightening policies are making investors flee risk assets. Central banks around the world have injected trillions of dollars of stimulus into the global economic system in order to shore up the unfavorable conditions driven by the pandemic. The low interest rates set by banks are starting to reverse, and it’s all hurting the financial system. Cryptocurrencies are obviously affected too, as prices have been dropping for the best part of recent months.
To make matters worse, the Luna Guard Foundation has dumped Bitcoin on the market in an attempt to fix the UST peg, a desperate move that has worsened the recent dips.
El Salvador Buys the Dip Again
And while recent dips have been hell for investors and longtime holders, the country of El Salvador has been buying it all the time. President Nayib Bukele announced the buy of 500 Bitcoins at a price of just over $30,000 on Twitter, and said that the country can make around $1 million in profit when the price went up hours later. It took another dip later, so it wasn’t a moment to celebrate.
With the 500 new Bitcoins, El Salvador’s stockpile currently sits at over $71 million. Many have criticized the experiment as non-working, although the president continues supporting Bitcoin. Work on the proposed Bitcoin City should start soon, and further dips are likely to be bought by the country too.
The Central African Republic has followed El Salvador to the Bitcoin land, accepting it as legal tender. It was a move highly criticized by the IMF – a bit of a copy-paste situation of what happened with El Salvador. It remains to be seen if the recent dips will give Bitcoin more power in the long run, or if the crypto market crashes like pessimists think.