China reportedly launches widespread ban on crypto payments, warns of speculation
Overall crypto market cap drops $1 trillion
Ether down 40% at worst (rebounding strongly off $2,000), now back up near $3,000
Bitcoin down over $10,000 at worst (rebounding strongly off $30,000), now back above $40,000
Crypto proxy stocks hammered
JPMorgan sees bitcoin-to-gold rotation; and calculates fair-value at $35,000 amid institutional liquidations
Elon Musk reemerges tweeting "Diamond Hands" just before 11am.
As many HODLers have said, we've seen this story numerous times...
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Update (1300ET): And... It's ungone!
Crypto dip-buyers have been extremely active, sending Bitcoin back above $40,000 - that's $10,000 'off the lows' of the day...
And Ether is pushing back up neat $3,000...
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Update (1100ET): Bitcoin jumped from $35,000 to around $38,000 after Elon Musk, who was the initial catalyst for the crypto selloff, tweeted at 1042ET that Teska has diamond hands."
Tesla has 💎 🙌— Elon Musk (@elonmusk) May 19, 2021
Elon's tweet has helped stabilize the rout in bitcoin, which is now down just 14% after plunging 30% earlier.
Separately, in a BBG TV Interview, Cathie Wood who has long been a fan of bitcoin, kept her $500,000 price target for bitcoin and said that "the odds are going up now that we have had this correction. I don’t know if its going to be this year or not.”
She also said that the bitcoin selling is as bad as it got during the Coronavirus crisis. As a reference, the intraday low in March 2020 was 3914 with a peak to trough drop of 63% in the span of a month. Fast forward to today -- in the span of a month, bitcoin has dropped by 54% from just shy of 65,000 to as low as 30,000. As Bloomberg notes, "It does ring similar to what we saw in last year’s crash -- what’s interesting is we’re seeing similar drops in the same time horizon of about four weeks."
Wood also said that thodds of crypto ETF approval are going up now that we’ve had this correction (it wasn't quite clear why).
Another factor helping bitcoin rebound is news from Coinbase that it has identified the issue causing outages on its platform and is rolling out fixes to users now, likely prompting buy-the-dip sprees.
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Update (1000ET): Bitcoin and Ethereum are rebounding strongly.
Bitcoin found support at $30,000...
And Ether bounced off $2000, and is back above its 100DMA...
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Update (0900ET): Things escalated a little more since we first wrote this morning. Ethereum is the biggest loser, crashing below $2000 (briefly), down 40% on the day, and Bitcoin is testing $32k (down 25%)...
And that leaves total crypto market capitalization down over $1 trillion from its highs...
Coinbase has crashed 11% to a record low, well below its Reference price...
And the rest of the Crypto proxies are also getting hammered...
Gold is bid again as bitcoin is battered as JPMorgan notes that institutional investors appear to be shifting away from bitcoin and back into traditional gold, reversing the trend of the previous two quarters.
It is not clear what is driving this shift. Perhaps institutional investors are fleeing bitcoin as they see its previous two quarter uptrend ending and thus seek the stability of traditional gold away from the rapid downshifting of digital gold. Or they perhaps view the current bitcoin price as too high relative to gold and thus do the opposite of what they did in the previous two quarters, i.e. they sell bitcoin and buy gold.
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Well that escalated quickly...
Crypto markets are in freefall this morning after Reuters reported China has banned financial institutions and payment companies from providing services related to cryptocurrency transactions, and warned investors against speculative crypto trading.
It was China’s latest attempt to clamp down on what was a burgeoning digital trading market. Under the ban, such institutions, including banks and online payments channels, must not offer clients any service involving cryptocurrency, such as registration, trading, clearing and settlement, three industry bodies said in a joint statement on Tuesday.
“Recently, crypto currency prices have skyrocketed and plummeted, and speculative trading of cryptocurrency has rebounded, seriously infringing on the safety of people’s property and disrupting the normal economic and financial order,” they said in the statement.
The result is crypto carnage, but as many have noted, this is not 'new' news...
3 dumb things happened within the last hour:— Qiao Wang (@QwQiao) May 18, 2021
1) Reuters writing a misleading article on China banning
2) People retweeting Reuters and believing it
3) Market dumping on the Reuters news
China didn't just ban crypto. It's reiterating an anti-speculation law from years ago.
The total market cap of the cryptocurrency space has crashed by more than $800 billion since its peak last week, from over $2.5 trillion on May 12th to just above $1.7 trillion this morning (the lowest since March)...
Bitcoin has erased 50% of its gains from the start of the most recent rally (and found support there) after breaking below its 200DMA for the first time since March 2020...
Note that Bitcoin is back to the Feb 8th opening price, when Tesla made its Bitcoin announcement...
And Ethereum broke back below its 50DMA and 100DMA (and found support there)...
However, despite the full-frontal FUD assault that the crypto market has been under in recent weeks, many altcoins have seen their prices breakout over the past couple of days as traders rotate out of underperforming tokens and into tokens that have turned bullish.
The standout performance of the week goes to MATIC, the native token of Polygon, a rapidly rising Ethereum layer-two solution that has morphed into an oasis for traders looking for lower fees.
Other notable double-digit gainers include 40% gains for ARK and Celer Network's CELR, as well as 20% gains for AAVE and Helium Network Token (HNT).
It's not all FUD though as we note Bitcoin is still up 33% YTD and Ether up over 260%...
Bitcoin's "dominance" of the crypto space has fallen below 40% for the first time since June 2018, as Ethereum's share has risen to just below 20% (its highest since Feb 2018)...
CoinTelegraph reports that inflows of Bitcoin to major centralized exchanges soared during the past 24 hours. More coins were sent to trading posts than at any time since the “Black Thursday” crash of 2020 — a fact that led Lex Moskovski, chief investment officer of Moskovski Capital, to conclude: “People are scared.”
With outflows from exchanges typically being inferred as indicating crypto assets are being moved into cold storage for security or DeFi protocols for yield generation, inflows are interpreted as assets being moved onto centralized platforms to be sold.
Additionally, CoinTelegraph notes that data from crypto data provider Glassnode shows that Bitcoin price drawdown has led to almost a quarter of unique on-chain entities being at a loss. This situation also bears some parallels to previous extreme downside price action periods that interrupted bullish advances.
Data also indicates roughly 35,000 Bitcoin worth more than $1.4 billion has been deposited on Binance in the past 48 hours.
Largest day of BTC inflows to Binance ever. pic.twitter.com/HG56s37mtv— William Clemente III (@WClementeIII) May 18, 2021
“Feels like capitulation,” said Kraken growth lead Dan Held. Clemente replied: “Let’s see one final nasty liquidation wick.”
Finally, we note that Bitcoin has fallen below its 'stock to flow' fair value price...
Offering hope for some of a rebound back to $56,000 or more given the same magnitude drop in March 2020.