14.07.2024

Could Bitcoin and the cryptocurrency market crash today as it did in March 2020?

March 12, 2020 became one of the darkest days in the history of the crypto market. It was the span of time that Bitcoin experienced one of the largest drops in its existence, dropping from $ 8,000 to a low of $ 3,600 in just a matter of hours.

Then, over a day, long positions in BTC worth more than a billion dollars were liquidated , which caused one of the sharpest drops in value in the short history of the market. During the above time period, the cryptocurrency lost almost 50 percent of its value . Should we expect something like this now?

During the same week, Bitcoin and many other cryptocurrencies showed an extremely high correlation – that is, a link – with the US stock market, which at the time was considered possible due to the general decline in investor appetite for high-risk assets. The main reason for panic then was the sharp spread of COVID-19 and the massive lockdown in many countries.

We found a screenshot from that day. Bitcoin’s behavior in mid-March 2020 looked like this.

Today, the value of BTC is more than ten times higher than last year’s low. However, many investors do not leave the question: can such a collapse ever happen again?

What will happen to the Bitcoin exchange rate?

The experts of the news publication Cointelegraph tried to answer this question. The day before, they contacted an independent cryptanalyst under the pseudonym CryptoYoda to find out his point of view on what was happening.

In an interview, the expert stated that the combination of a limited supply of cryptocurrency, too high trading ratio with high leverage and huge demand provides ideal conditions for such crashes. Here is a quote from him.

We will continue to see many temporary market crashes as they have a way to regulate and balance the strong emotions of both retail and institutional investors and traders. It’s just that we’ve never seen an «experiment» like this on such a massive scale, involving limited supply coupled with insane demand and leveraged instruments that will make this bull run quite volatile.

Here the analyst is referring to short-term market corrections following the example of what we have seen since mid-February. At the same time, he admits the likelihood of a more noticeable collapse, since various factors contribute to this. But something like that simply cannot be out of the blue: for the collapse of the scale of March 2020, some serious event is needed.

falling cryptocurrency market

The same drop on the 1-day Bitcoin chart

The US Federal Reserve’s response to the crisis in the form of printing new dollars on an unprecedented scale has only confirmed Bitcoin as a means of fighting inflation in the eyes of investors. In addition, with the constant influx of institutional adoption – that is, companies that actively and professionally invest in the crypto market in one form or another – financial regulators around the world have not yet started to put a spoke in the wheels of Bitcoin. This means that there has not yet been a serious wave of criticism of digital assets on their part, which could «frighten off» investors.

There is also another point of view. Daniele Bernardi, founder of startups PHI Token and Diaman Group, believes that last year’s fall in the price of BTC and the collapse of financial markets around the world were entirely related to the outbreak of the pandemic. Such an event is unique in itself and is unlikely to happen again. Here is a quote from him.

Any asset, even gold, fell sharply due to the uncertainty in the development and spread of the pandemic. In my opinion, Bitcoin’s move was more about the irrational and emotional selling of everything by investors – an effect well known as “systematic risk”, rather than the cryptocurrency itself.

Although the events of March 12 will forever remain in the memory of every crypto investor, most technical indicators indicate that the possibility of such a scenario repeating once again is very unlikely. It is also worth mentioning that many fears about the coronavirus, which raged at this time last year and, apparently, are the main reasons for the collapse, are now largely no longer relevant against the background of the start of vaccination programs in many countries of the world.

In addition, Bitcoin and other coins have confirmed their title of safe assets, because over the past year, only BTC has grown by at least a thousand percent. And taking into account investments in cryptocurrency from giants like MicroStrategy and Tesla, the position of the blockchain asset has only become stronger.

We believe that the events of spring 2020 were indeed unique and are unlikely to be repeated in the future. Then investors wanted to keep their money in the face of uncertainty and undertook to sell assets, which provoked the collapse. Now the cryptocurrency market has become much stronger, and there are much more areas of application for blockchain assets. So the market situation is definitely very different from the past.

Will there be new corrections in the coin market? Of course, no one has canceled the healthy pullbacks in the bullish trend following the sharp rise in assets. However, they are unlikely to reach the same depth as in March last year.

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