The beginning of the week has been extremely bad for cryptocurrencies, with all coins now in the "red zone". The tug-of-war game between the bulls and the bears ended in a victory for the pessimists, and as of this writing, we are witnessing Bitcoin losing more than 7%, changing hands over $32,800. Thus, retail investors were selling over the weekend, and large institutional investors had their say at the beginning of the week.
Positive factors in the form of Bitcoin being accepted as the official means of payment in El Salvador, Musk's statements about the possible resumption of accepting payments for Tesla cars in bitcoin, and MicroStrategy's willingness to continue buying the asset – fully recouped its potential. It is very likely that the coin could have risen well above $40K but sustained selling pressure prevented that from happening. Investors were actively taking profits, convincing other market players that Bitcoin could have already realized its maximum growth potential in the current cycle.
A break of $30K this time could be fatal for the first cryptocurrency, as we would be dealing with a final reversal of the broad trend. However, it is worth noting, history is not always cyclical and the market does not always repeat patterns, giving participants the opportunity to predictably enter and exit the market. Recent years have shown that bearish sentiment often comes at a high price. There is always the possibility of a sharp reversal due to new positive fundamental events.
If Bitcoin continues a massive drop, the futures market continues to liquidate positions, and the price eventually touches lows around $20K, so many discount-hunting investors may enter the market that a reverse wave of growth could offset all the bearish sentiment, rising the excitement among investors seeking quick wealth to a maximum. In recent cycles, the traditional and cryptocurrency markets have created a type of investor who seeks to beat the majority by buying back assets on declines or local lows.
There are so many of these investors that they have become a mainstream force. And if you're waiting for a low to buy, there is a big chance many other investors are waiting for the same thing, and the only question is who will rush to buy faster, keeping the market from forming a real bottom. That's why the market will move to outbid even the trickiest, implementing new scenarios that are not yet mainstream.
At the moment there is "no blood in the streets," whereas that is the condition Warren Buffett considers mandatory for buying but the level of anxiety is so high that a global sell-off could start at any moment. No one wants to become too early seller but buying cannot last forever either, and the crypto market, in this case, could be a harbinger of a broad correction in the traditional market as well.