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Why is crypto crashing? Will bitcoin prices ever recover? Here's what traders and investors say

Dow Jones2021-05-20

Bitcoin sold off sharply Wednesday. The slump represented an acceleration of a downtrend in the world's No. 1 crypto that had begun over the past 10 days or so, investors and industry specialists told MarketWatch.

At last check, bitcoin prices were changing hands at $38,732,56 on CoinDesk, which is actually a remarkable feat since it touched a session low of $30,201.96 before bouncing back.

Prices of Ether on the ethereum blockchain were off 22% at $2,608.84 after touching an intraday nadir at 1,902.08, and dogecoin was off 25%, changing hands at 35.8 cents.

When bitcoin sneezes the rest of the crypto complex catches a cold because the dominant digital asset has increasingly become a gauge of sentiment not just in nonconventional markets but as a measure of risk appetite more broadly.

Crypto markets have shaved more than $850 billion from their combined market value, according to CoinMarketCap.com .

The stock market also saw substantial selling on the day, which abated somewhat by the closing bell. The Dow Jones Industrial Average , the S&P 500 index and the Nasdaq Composite Index suffered a third straight day of losses.

Why is bitcoin crashing?

Don't call it a crash. Bitcoin is falling, but its an asset known for volatile periods.

Its current slump isn't pegged to one single event or piece of news but was instead being blamed on fear, uncertainty and doubt, or FUD, in the parlance of crypto traders. Fear, at least partly, centered on China's digital-asset policy. The People's Republic was reportedly cracking down in the use of digital assets. For veteran crypto investors, such reports aren't new.

Meanwhile, bearish tweets from crypto enthusiast Elon Musk were also credited with tanking the crypto complex. Musk said earlier this month that he would no longer allow bitcoin to be used for payment at electric-vehicle maker Tesla $(TSLA)$ until the crypto becomes more environmentally friendly.

Musk had been one of the key reasons that crypto broadly had been on an uptrend, with his tweets on meme coin dogecoin and bitcoin supporting an uptrend in those assets.

Separately, analysts at JPMorgan Chase & Co. $(JPM)$, including Nikolaos Panigirtzoglou, make the case that investors in bitcoin were shifting to gold futures , which coincidentally has been seeing steady climbs in recent trade.

"Institutional investors appear to be shifting away from bitcoin and back into traditional gold," they wrote.

Market participants told MarketWatch that Wednesday's losses also were being amplified by the use of leverage which was forcing margin calls at some crypto trading platforms.

Complicating matters, some crypto trading platforms, including Coinbase Global $(COIN)$, experienced outages that appeared to help put further pressure on prices.

A spokeswoman for Coinbase said that the company's trading problems have since been resolved.

Will bitcoin prices recover?

Bitcoin and crypto are inherently volatile.

That said, bullish investors are advocating that long-term investors stay the course or review their original investment thesis before dumping crypto holdings.

Over the course of the past 11 years, bitcoin has seen more than 750 instances where prices saw a daily change of 5% or greater, more than 230 instances in which it swung by at least 10% and nearly 50 times that it has moved by at least 20%, according to Dow Jones Market Data.

"Correction in the cryptocurrency market is a common phenomenon. It doesn't mean, however, that a bear market is under way," wrote Konstantin Boyko-Romanovsky, CEO and founder of Allnodes, in emailed comments.

To be sure, past performance is no guarantee of future results but that is what bullish investors tend to hang their hats on when they advocate for long-term ownership of bitcoin and its ilk.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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Comment95

  • KITkat
    ·2021-05-20
    "Don't call it a crash. Bitcoin is falling"*eye-rolled, whatever. People losing money, this is the fact. 
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  • The_scalper
    ·2021-05-20
    This is one hell of a ride.
    Reply
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  • megs_
    ·2021-05-20
    Crypto rocks!
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  • Traderyt
    ·2021-05-20
    Bought the many dips 
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  • HMian
    ·2021-05-20
    No interest in virtual coins :)
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    • HMian
      Haha yeah
      2021-05-20
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    • ShuJie
      [Smile]
      2021-05-20
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    • ShuJie
      Same same
      2021-05-20
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    View more 2 comments
  • jaswsf
    ·2021-05-20
    Up up
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  • WQlow
    ·2021-05-20
    Crypto is the future !
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  • Baybay
    ·2021-05-20
    DIP DIP DIP
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  • sUs
    ·2021-05-20
    Buy dip
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    • fionat
      Good opportunity
      2021-05-20
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  • PiggyBubbles
    ·2021-05-20
    Like and comment pls
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    • PiggyBubbles
      Ok
      2021-05-20
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    • Baybay
      comment back and like back thank you
      2021-05-20
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  • AntonyGeorge
    ·2021-05-20
    No it will dip again.Waiting for next move from china for crypto.
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  • 3nn
    ·2021-05-20
    Winter is coming
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  • DZJ1976
    ·2021-05-20
    Recovery would be wonderful for my MSTR [流淚] [驚訝] [笑哭] [笑哭] 
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  • good1234
    ·2021-05-20
    Buy buy buy! BTFD!!!! ??
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  • Goldox
    ·2021-05-20
    Please like & comment for some consolation coins. 
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    • Goldox
      Thanks!
      2021-05-20
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    • XxCloudyxX
      Done~
      2021-05-20
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  • eseah88
    ·2021-05-20
    Its dip buying time!
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  • ohty0308
    ·2021-05-20
    Buy the dip!!! [Cool] 
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    • ohty0308
      ??
      2021-05-20
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    • ecpm
      Comment and like
      2021-05-20
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  • 超群yibo
    ·2021-05-20
    Mooning ..
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  • Seowting
    ·2021-05-20
    Ok
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  • ahswee
    ·2021-05-20
    ?? and HODL! Like and comment thanks!
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    • ohty0308
      yaasss
      2021-05-20
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    • diggydog
      I'll just watch.
      2021-05-20
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