Bitcoin’s price plunge part of the normal evolution of a longer-term bull market, says expert
For the first time since early March, the price of the world’s largest cryptocurrency by market cap, Bitcoin, crashed below the psychological $50,000 mark earlier today.
Bitcoin (BTC) is changing hands at $49,375 at the time of writing, representing a significant drop of over 8% in the last 24 hours according to CoinMarketCap.
The price drop occurs amid United States President Joe Biden’s decision to increase capital gains taxes in the country, a move that if put into action could discourage investments in digital assets. Ethereum also witnessed a price drop of almost 8% after the announcement regarding the proposed changes in the US tax code was released
Experts fear that the Bitcoin price drop might be an indication that the larger cryptocurrency market is headed towards a correction and predict a further plunge in Bitcoin’s price.
“I think we could pull back to $20,000 to $30,000 on bitcoin, which would be a 50% decline, but the interesting thing about bitcoin is we’ve seen these kinds of declines before,” Scott Minerd, the Global Chief Investment Officer of Guggenheim Partners told CNBC.
In 2018, after a massive price rally the previous year, Bitcoin dropped by over 90% of its value. It regained ground in 2020 and the Coinbase IPO coupled with the effects of the global financial crisis last year led to an increase in interest towards cryptocurrency leading to Bitcoin almost doubling in price in the first three months of 2021.
Minerd explained that the price drop witnessed by the market earlier today is part of “the normal evolution in what is a longer-term bull market,” adding that he expects Bitcoin’s price to eventually reach beyond what it reached during the last bull run.
The price drop led to investors liquidating almost $500 million worth of Bitcoin long positions and over $1.6billion worth of crypto futures positions, data from bybt.com showed.
Further, as Bitcoin reached a dominance rate of 49.5%, its lowest since August 2018, investors shifted to altcoins like LINK, BAND and Qtum, a phenomenon that can be attributed to the increased interest in the DeFi space.
