Among experienced digital currency traders, there are few who do not remember last year’s Black Thursday. On that day, the price of Bitcoin fell more than 50% to $ 3,600. Now, with the arrival of March again, the price of Bitcoin is not far from its historical peak, but investors are still afraid of falling again.
Coin Telegraph in the report He has just mentioned March 12, 2020 (March 22, 1998) as one of the darkest days of the digital currency market. Bitcoin saw its biggest drop in ten-year history that day, falling from $ 8,000 to $ 3,600 in just a few hours.
In just 24 hours, something like $ 1 billion in long-term futures contracts were liquidated. This eventually led to a sharp drop in prices, which was unprecedented in the history of Bitcoin. The price of bitcoin lost about half its value that day.
During that volatile week, other digital currencies in the market, along with Bitcoin, underwent extensive reforms. On the other hand, many at the time saw the US stock market as an alternative; The collapse of volatile markets and the onset of the outbreak of the Corona virus added to the fire.
Stock market reform in March last year was unprecedented in the previous 30 years. The Dow Jones Industrial Average, for example, fell to 2,300. Lack of demand for bitcoin eventually reduced the price of bitcoin to $ 5,000 and then to $ 3,600.
Another fall imminent?
The question is, is the digital currency market facing another major collapse? CryptoYoda, a market trader, cites the triangle of “limited supply”, “steady increase in demand” and “high leverage trading” as the ingredients for flash crashes and sharp fluctuations.
We will also see temporary declines in both small-scale investors and large-scale investors and traders as they step in to legislate and balance the intense market excitement. This is because we have never encountered limited supply, high demand, and explosive devices such as levers on such a scale, and this poses a bit of a challenge.
Hunter Merghart, head of Bitstamp exchange operations, said the digital currency market structure had evolved significantly since March 2020, and that there was still a possibility of a collapse. According to him, at present, in the digital currency industry, there are many legal ways for instant transactions and derivative transactions, which create a lot of liquidity in the market.
“When we compare the current market with previous years, we see that there are a lot of active subscribers around the world who, if the price wants to go up overnight for unpredictable reasons, can make it easier to upset the market balance,” says Marghart.
Anshul Dhir, co-founder and CEO of EasyFi Network, said in a recent interview that a large amount of Decentralized Finance (DeFi) capital is currently locked in and the current market value is over 1. $ 5 trillion. The CEO of Izifa Network, a second-tier protocol for lending to Difai, went on to say that most positions have leverage as high as 50 times.
This year is very different from last year
While some bitcoin traders fear a sharp drop in prices, the general sentiment in the market this year is calmer than last year. Chad Steinglass, director of CrossTower trading platform, says that despite fears of a March price anniversary, there is no need to worry about it happening again. He added:
Although March 2020 was a milestone for digital currencies and all global markets and all assets, then the situation was in line with what the market meant and defined digital assets. The Fed’s swift and swift intervention to protect liquidity in the financial markets was what Nakamoto saw and warned of the dangers of the 2008 financial crisis. The crisis that led to the creation of Bitcoin.
Stein Glass went on to say that the Federal Reserve’s response to the Covid 19 crisis was a confirmation of the idea on which Bitcoin was based. He believes that this reaction has created an upward cycle that has persisted for at least the last 11 months. He says the Federal Reserve has so far shown no sign of changing its monetary policy, and even the US Congress is still reluctant to inject support packages into the economy. He believes that the fiscal policies of American institutions will continue until the corona crisis is over.
On the other hand, the slow and steady trend of bitcoin acceptance by institutional investors has led to widespread reform only if negative legislation is passed by the Securities and Exchange Commission (SEC) or the Treasury Department. It should not be forgotten that every week we see a large company entering the field of digital currencies and investing in them, and this reduces the possibility of falling prices.
Stein Glass says the return on US investors who have bought bitcoins at the bottom of the price and are now waiting to sell their bitcoins at the start of the tax season may be the only reason for the weakening uptrend in the market. He added:
However, I do not think that the sales volume of these people is very high compared to other major issues.
Daniele Bernardi, founder of PHI Token and Diaman Group, believes that the collapse of the digital currency and financial markets last year was entirely linked to the outbreak of the Corona virus. “It is unlikely that this will happen again,” he said.
Every asset, even gold and commodities, was plunged into obscurity due to the ambiguities of the Corona virus outbreak and its epidemic; So, in my opinion, Bitcoin price fluctuations were mostly due to the excitement and irrational sales of investors who were selling everything. The crash was largely due to what is called “systematic risk” and had little to do with bitcoin itself.
Is it safe to invest in Bitcoin?
Although the fall in the price of Bitcoin last year will not be forgotten by investors any time soon, the state of most technical indicators suggests that this is unlikely to happen again.
It should not be forgotten that fears about the Corona virus have been growing day by day for the past year and are no longer a fear; Because the vaccine for this disease is gradually being distributed on a global scale.
This market has taught everyone who participates in one issue well. That is, anything is possible in this market; For this reason, predicting the market trend is just a guess on the books and accounts, and any change globally could tell another story for this digital currency.