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Bitcoin price hit $6,400 back in mid-December 2019 and then took off like a rocket on powerful, over 50% rally.
The cryptocurrency had made it to above the key psychological “FOMO trigger” level of $10,000 before this latest collapse back down by 25% to $7,700. But why such a fall?
Coronavirus Concerns Causing Widespread Panic Over Pandemic
In just over two months, the novel coronavirus has infected over 100,000 people and the death toll has risen to nearly 4,000.
The rapid spread of the virus has led to extreme panic across the globe. People are scared for their lives, their finances, and their future.
With so much panic in the air, it’s not surprising to see trigger happy crypto investors selling everything they own in response to the black swan event.
On-Risk Asset Performing As Expected During Economic Crisis
It’s not just hitting crypto investors. The stock market is experiencing the largest selloff since the last recession.
According to financial analysts, the stock market bubble is bursting, and the pin that pricked the bubble is the coronavirus.
With all other markets in total collapse, Bitcoin price and the valuations of the rest of the cryptocurrency market have been a bloodbath since shortly after the stock market selloff began.
With more risk-averse stocks tumbling, investors are staying far away from the speculative asset class of cryptocurrencies.
Tax Changes Causing Investor Confusion
It’s peak tax season at this point and cryptocurrency investors in the United States – the largest potion of crypto investors – are now realizing they must report their holdings and transactions to the IRS or potentially face a penalty.
The tax form American citizens must submit to the government now includes a question on if that taxpayer held or traded cryptocurrencies like Bitcoin and Ethereum during the tax year.
It’s interesting that a single question on a tax form has changed things so much. In the past, many crypto investors have failed to report earnings or losses.
But moving forward, answering the question falsely could lead to jail time.
With so many realizing they may need to amend past tax returns and get their earnings up to speed for reporting, it wouldn’t be unusual to see a tax season-related spike in selling.
The fact Bitcoin price ran from $3,000 to $14,000 last year likely means many investors have profits to report. Profits they’ll now have to pay a portion of taxes on.
Bitcoin Skepticism Soaring Ahead of Halving
Bitcoin skepticism is higher than ever, leading into the asset’s halving.
While many believe the asset will take off like a rocket ship due to the supply and demand balance being offset, others envision the end of the cryptocurrency
Industry analysts are publicly asking why exactly Bitcoin needs to exist and what purpose – aside from speculation – does it truly serve?
Even today, I think it's far more likely that Bitcoin will collapse, than rally to a new all time high. Nobody uses it. Its heavily centralized to China. It consumes enormous amounts of energy, and it has zero properties of a "safe haven" investment. Did I mention nobody uses it?
While this is clearly opinion-based, even the CEO of Coinbase is skeptical of the cryptocurrency’s future.
Completely Normal Retest of Bitcoin Price Technical Support
Oftentimes, crypto investors are seeking a reason for a drop, or news to tie together with a certain selloff.
But sometimes, the technical structure of the market is simply calling for a retest of certain trend lines.
Bitcoin price is resting on a seven-year trend line currently and is touching the bottom of the logarithmic curve.
These supports have acted as such for much of the asset’s existence and is simply being retested once again during fearful times, to confirm that the asset is safe, sound, secure, and ready to rise once again.
If the support holds yet again, Bitcoin could take off from here. If the support fails, then there will be yet another reason for Bitcoin’s collapse to add to the list.
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