The world’s largest cryptocurrency by capitalization had one of its worst weeks ever this week and though for now the crisis seems to have been averted, it is important to understand what happened and where that leaves Bitcoin in the future.
First off, Bitcoin was recently harmed by some reservations about it voiced by a person who now bears quite a significance for the cryptocurrency market - Elon Musk, CEO of Tesla. Musk is leading the push to innovate in a way that protects the environment and despite his love for cryptocurrency, he judged Bitcoin too harsh for the environment, due to the pollution produced by Bitcoin farms, which demand huge amounts of electricity that is often not generated using renewable energy.
Earlier in 2021, Musk sent Bitcoin spiralling down when he announced that people will no longer be able to buy Tesla cars using this asset as currency, something that was possible previously. But Tesla’s CEO quickly walked back from this comment after he helped establish an organization of Bitcoin miners who will work on sustainable solutions together, which boosted Bitcoin.
However, this week China got involved. It has been involved for a while, because the People’s Party has a dislike for the near complete lack of regulation that defines cryptocurrencies and the usually untraceable transactions they are used for.
Over the weekend, the People’s Bank of China and several other financial institutions announced that they will close any accounts that have been associated with cryptocurrency. No official institution or company in China would also dare to touch or invest in crypto due to the latest changes in Chinese financial regulation.
Thus, Bitcoin slumped to below $30,000 this week, a massive drop, considering how long it managed to hold above 30K, and definitely very far from its $65K maximum reached earlier this year. It has since recovered to around $34,000, but its price chart shows the death cross happened (the 50 EMA moved below the 200 EMA). As a result, barring any further surprise events in the financial markets that pertain to cryptocurrencies, we expect Bitcoin to struggle to hold onto any gains and likely head further down. A drop to 20K later this year is now a real possibility.
