Publier
The Cryptonomist
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The Bitcoin crash today appears to have halted
Yesterday, the price of Bitcoin experienced a significant crash.
Today, however, the crash seems to have temporarily halted, or at least its acute phase.
To fully understand what is happening, it is advisable to first analyze the crash, and only then proceed to examine what is happening today.
The Bitcoin Crash
The recent crash in the price of Bitcoin actually began on Wednesday, when it fell below $75,000.
Initially, it didn’t seem to be anything significant, especially since the day before it had dropped to $73,000 only to bounce back to $76,000.
However, Wednesday’s decline was triggered by factors that continued to drive down the price of BTC the following day, namely yesterday.
At one point, it dropped to $72,000, and after a brief failed rebound, it fell to $70,000.
However, the real crash was yet to begin, and it arrived with the opening of the US stock markets.
Practically within just 14 hours, it plummeted from $71,000 to $60,000, marking one of the sharpest drops in recent years.
In percentage terms (-16%), it is not one of the worst declines in BTC’s history, but it is certainly one of the worst in recent years.
If during the acute phase, which lasted 14 hours, it lost 16%, from the start of the decline it has lost 21% in just over a day. Subsequently, it recorded a minor rebound with a +8% from the low, but for now, it is not sufficient.
The Causes of Bitcoin’s Crash Today
The causes of this crash, however, are not to be found in any hypothetical issue with Bitcoin itself.
In fact, the decline appears to have been triggered particularly by the general fear present in the American markets.
In fact, the VIX index, often used as a barometer of fear in the traditional American markets, had already marked an initial peak above 20 points on Monday, followed by a smaller peak on Tuesday and another even smaller one on Wednesday.
In all three of these cases, the price of Bitcoin had fallen, but yesterday there was a slight spike in the VIX. Within a day and a half, it surged from under 19 points to nearly 22, causing panic particularly among high-risk assets.
The S&P 500 index ended up losing 3%, while the American private equity sector lost 4% during the same period.
In other words, fear has focused on higher-risk assets, with significant but more contained losses on medium-risk assets, such as leading American equities.
The fact is that Bitcoin is an asset with a significantly higher potential risk compared to equities or private equity, therefore it is the one that has been hit the hardest.
It is noteworthy that since mid-January, private equity has been losing nearly 11%, while Bitcoin is down 32%.
The Mini-Rebound
After yesterday’s crash, a mini-rebound was expected.
For now, it is actually just a very small technical rebound after marking a new local bottom, but there is a possibility that it could extend at least until Monday.
Although no one knows if this technical rebound will last for a few more days or make way for further declines, the VIX index futures have slightly decreased today (below 21 points), so for now, fear seems to be subsiding.
To be honest, the hypothesis of a rebound was already circulating yesterday, because Bitcoin’s crash was similar to that of November, which ended on the 21st at $80,000.
At the time, after 10 days of decline, there was then a 17% rebound from the local bottom, while yesterday marked the seventh day of decline. The parallelism is therefore imperfect, but the two trends appear very similar in terms of the extent of the drop, albeit with slightly different timings.
For the current mini-bounce to turn into a real rebound, it is necessary for Bitcoin’s price to rise around $66,000 today after the reopening of the US markets, and for it to return to $70,000 by Monday.
The Reasons for Fear
The reasons behind the rise in fear (VIX) yesterday are not certain and evident.
However, since fear has concentrated on higher-risk assets, while also causing minor damage to medium-risk ones, it might be linked to future expectations.
It is possible that fear regarding the evolution of the economic/financial situation in the USA played a significant role, especially in light of recent political developments.
Although at a superficial glance the economic outlook seems good in the short to medium term, when considering the geopolitical risks in the medium and long term, the situation appears far from rosy.
The risk is that the situation in the USA could deteriorate in the coming months, especially with the mid-term elections in November approaching.
At this moment, Trump’s Republicans appear to be at a significant disadvantage, with Trump himself potentially facing the risk of impeachment in the event of a strong Democratic victory. Unfortunately, from some recent statements by Trump, as well as Bannon, a potential risk emerges that the US government might use coercive methods to try to persuade, or even “force,” US voters to vote for the Republicans.
If such a scenario, currently only hypothetical, were to materialize, fear would very likely turn into sheer terror, as it would signify the end of U.S. democracy (it should be noted that the USA is the world’s largest economic and military power).
Today, however, the crash seems to have temporarily halted, or at least its acute phase.
To fully understand what is happening, it is advisable to first analyze the crash, and only then proceed to examine what is happening today.
The Bitcoin Crash
The recent crash in the price of Bitcoin actually began on Wednesday, when it fell below $75,000.
Initially, it didn’t seem to be anything significant, especially since the day before it had dropped to $73,000 only to bounce back to $76,000.
However, Wednesday’s decline was triggered by factors that continued to drive down the price of BTC the following day, namely yesterday.
At one point, it dropped to $72,000, and after a brief failed rebound, it fell to $70,000.
However, the real crash was yet to begin, and it arrived with the opening of the US stock markets.
Practically within just 14 hours, it plummeted from $71,000 to $60,000, marking one of the sharpest drops in recent years.
In percentage terms (-16%), it is not one of the worst declines in BTC’s history, but it is certainly one of the worst in recent years.
If during the acute phase, which lasted 14 hours, it lost 16%, from the start of the decline it has lost 21% in just over a day. Subsequently, it recorded a minor rebound with a +8% from the low, but for now, it is not sufficient.
The Causes of Bitcoin’s Crash Today
The causes of this crash, however, are not to be found in any hypothetical issue with Bitcoin itself.
In fact, the decline appears to have been triggered particularly by the general fear present in the American markets.
In fact, the VIX index, often used as a barometer of fear in the traditional American markets, had already marked an initial peak above 20 points on Monday, followed by a smaller peak on Tuesday and another even smaller one on Wednesday.
In all three of these cases, the price of Bitcoin had fallen, but yesterday there was a slight spike in the VIX. Within a day and a half, it surged from under 19 points to nearly 22, causing panic particularly among high-risk assets.
The S&P 500 index ended up losing 3%, while the American private equity sector lost 4% during the same period.
In other words, fear has focused on higher-risk assets, with significant but more contained losses on medium-risk assets, such as leading American equities.
The fact is that Bitcoin is an asset with a significantly higher potential risk compared to equities or private equity, therefore it is the one that has been hit the hardest.
It is noteworthy that since mid-January, private equity has been losing nearly 11%, while Bitcoin is down 32%.
The Mini-Rebound
After yesterday’s crash, a mini-rebound was expected.
For now, it is actually just a very small technical rebound after marking a new local bottom, but there is a possibility that it could extend at least until Monday.
Although no one knows if this technical rebound will last for a few more days or make way for further declines, the VIX index futures have slightly decreased today (below 21 points), so for now, fear seems to be subsiding.
To be honest, the hypothesis of a rebound was already circulating yesterday, because Bitcoin’s crash was similar to that of November, which ended on the 21st at $80,000.
At the time, after 10 days of decline, there was then a 17% rebound from the local bottom, while yesterday marked the seventh day of decline. The parallelism is therefore imperfect, but the two trends appear very similar in terms of the extent of the drop, albeit with slightly different timings.
For the current mini-bounce to turn into a real rebound, it is necessary for Bitcoin’s price to rise around $66,000 today after the reopening of the US markets, and for it to return to $70,000 by Monday.
The Reasons for Fear
The reasons behind the rise in fear (VIX) yesterday are not certain and evident.
However, since fear has concentrated on higher-risk assets, while also causing minor damage to medium-risk ones, it might be linked to future expectations.
It is possible that fear regarding the evolution of the economic/financial situation in the USA played a significant role, especially in light of recent political developments.
Although at a superficial glance the economic outlook seems good in the short to medium term, when considering the geopolitical risks in the medium and long term, the situation appears far from rosy.
The risk is that the situation in the USA could deteriorate in the coming months, especially with the mid-term elections in November approaching.
At this moment, Trump’s Republicans appear to be at a significant disadvantage, with Trump himself potentially facing the risk of impeachment in the event of a strong Democratic victory. Unfortunately, from some recent statements by Trump, as well as Bannon, a potential risk emerges that the US government might use coercive methods to try to persuade, or even “force,” US voters to vote for the Republicans.
If such a scenario, currently only hypothetical, were to materialize, fear would very likely turn into sheer terror, as it would signify the end of U.S. democracy (it should be noted that the USA is the world’s largest economic and military power).
Avertissement : comprend des opinions de tiers. Il ne s’agit pas d’un conseil financier. Peut inclure du contenu sponsorisé. Consultez les CG.