Should we expect a repeat of last year’s March collapse in bitcoin prices?

In the middle of March last year, the crypto market experienced one of the largest falls. For example, in just one day, bitcoin quotes fell by 39%, and in less than a week, by 59%, to $ 3.7 thousand. At the same time, Ethereum experienced the largest decline in its history. The altcoin price fell by 55% in 24 hours, to $ 86. This happened against the backdrop of a sharp drop in the stock market, as well as in commodities, especially oil, writes RBC Crypto.

A similar dynamic was caused by the spread of the Covid-19 coronavirus and the introduction of corresponding restrictions around the world. Since then, the quotes of most assets have recovered, and some of them have even renewed historical highs. However, now there are opinions that such an increase is unjustified, which indicates the prospect of a correction. Experts told whether the crypto market could collapse again.

“A correction is brewing in the cryptocurrency market”

Victor Pershikov, Lead Analyst at 8848 Invest

A repeat of last year’s events, when bitcoin crashed amid falling classic markets, has become less likely over the past year. If you do not take into account the “black swans”, such as the hacks of the largest crypto-exchanges, then one of the main opportunities in which a collapse can occur is the collapse of stock markets, overheated against the background of significant liquidity and rising bond yields. If we see a surge in inflation in the United States, similar to the 80s of the last century, then in order to wait out the storm, investors will again prefer to sell their assets, as was the case in March last year.

At the same time, over the past year, the cryptocurrency has evolved, including due to the influx of institutional investors, and has significantly increased its capitalization, which, although it remains small, is still higher than a year ago (as of March 10, the cryptocurrency market is estimated at $ 1 , 7 trillion). Now, in order for the CFA market to fall, a large number of negative factors are needed, of which the dynamics of adjacent markets, stock (American and Chinese), and commodity markets is still obvious.

A correction is brewing on the crypto market, since now the price growth is supported solely by the internal trends of crypto assets, without looking at the divergence from the classic markets. Any crisis in the stock and commodity markets can provoke a spiral in the fall in the value of digital assets, but so far I do not see any reasons why the March 2020 events could be repeated. Correction of bitcoin is likely, but “correct”, technically and fundamentally justified, but the hysterical drop in cryptocurrency quotes is not yet visible.

“Bitcoin may fall in price by 50%”

Nikita Soshnikov, director of the cryptocurrency exchange service Alfacash

In March 2020, the entire financial market collapsed, taking into account a very powerful factor in the form of a pandemic and the accompanying uncertainty. Bitcoin was no exception here, but no tragedy happened, just look at the fall in the value of other much more stable assets during this period.

Could the first cryptocurrency lose 50% in two days? Of course it can. The only question is what kind of attendant circumstances are needed for this and whether bitcoin can sharply depreciate in isolation from general market trends.

We have already seen that even in the face of a global economic downturn in 2020, the cryptoindustry can feel confident enough and recover faster than other segments of the financial market, and bitcoin can set new records, for example, against the backdrop of American government support for the economy.

In my opinion, a scenario with a 50% fall in value is possible, but only in the event of serious intervention by financial regulators of leading countries, for example, a sharply negative policy towards cryptocurrencies by the Securities Commission or the US Financial Crimes Agency. Such a factor, indeed, can provoke a collapse in the value of cryptocurrencies.

“The market continues to be bullish”

Mikhail Karkhalev, financial analyst at Currency.com

The reason for the collapse in March 2020 was the spread of COVID-19 around the world and the subsequent introduction of quarantine measures. Investors within a few days withdrew from all risky assets, the collapse occurred not only in the crypto market, but also in the stock and commodity markets. Today there are no such risks: vaccines are working, the pandemic is on the decline.

2020 passed relatively calmly, thanks to the action of central banks to save the world economy from collapse, by allocating stimulus packages, QE quantitative easing programs, rate cuts and other monetary and fiscal instruments. In simple words, the resulting hole in the economy was filled with money, this allowed the markets to recover quickly, which supported the population and the economy, which today is recovering quite dynamically. To consolidate the result and finally get rid of the consequences of the pandemic, the US Federal Reserve is allocating an additional stimulus package for $ 1.9 trillion. This is an additional inflow of capital to financial markets.

To summarize the above, there are no risks on the market today that could collapse bitcoin or other risky assets by 50% or more. Bitcoin is quite volatile today and can easily fall by 20-30%, which we have already seen twice this year. However, these are only corrections, not collapses. The market continues to be bullish.

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