Massive Correction Underway
According to data by Coinmarketcap, the market value of the entire cryptocurrency market now sits at nearly $920 billion after printing $1.17 trillion two days ago. This was when BTC price broke above the $40,000 mark for the first time, before correcting sharply about 30% to the low $30,000s.
The drop in the crypto market could indicate that investors have been taking profits following a massive rally over the past several months. Bitcoin price soared more than 300% over the past 12 months, and it touched a record high at $42,000 last week.
“The correction we saw was expected as we believe the BTC price surge recently from under $20,000 to $40,000 in the past four weeks will induce sell pressure,” said Simons Chen, executive director of investment and trading at Babel Finance.
Analysts and investors have different opinions on possible reasons behind Bitcoin’s recent frenzy, including larger adoption among institutional investors. Furthermore, Bitcoin has also been viewed as a safe-haven asset and a hedge against inflation, like gold.
Popular investment banking company JP Morgan said BTC could surge to as much as $146,000 in the long run as it competes with gold as an “alternative” asset. However, in order to hit that mark, volatility in Bitcoin must significantly drop, the bank said.
On the other hand, Jehan Chu, founder of crypto venture capital and trading firm Kenetic Capital, said the latest drop in Bitcoin price could present a new buying opportunity.
“This short term correction is both natural and needed, and is a great entry point for long-term investors as we quickly reach $50k this quarter and $100k by year’s end,” Chu said.
Naeem Aslam, chief market analyst at AvaTrade, is of a similar opinion.
"This is not the time to panic but to look at this opportunity from a more optimistic lens as the bull run is not over yet, and it is still likely to make its journey to the upside," Aslam wrote in a note.
The world’s largest cryptocurrency trades around $33,250 or 6% lower today. Today’s close in the red will mark the fourth consecutive daily performance where BTC recorded losses.
Bitcoin price plummeted on Monday to drag other altcoins lower as well and wipe almost $200 billion off the entire cryptocurrency market.