Saying that May 2021 wasn’t the best month for cryptocurrencies might be the understatement of the century. After reaching a new all-time high of over $64.000, the price of Bitcoin crashed by more than 50%, reaching as low as $30.000.
This event was welcomed by Bitcoin shorters and people that bet against positive price action on options trading platforms like Bitlevex. However, the rest of the crypto community, and especially new investors, saw this as a sign that the bullish cycle in the crypto market might be prematurely over.
With that said, many veterans are still persuaded that this is just a setback in the current bull run. In this short post, we explore the reasons behind the recent crypto crash. More importantly, we will go over some recent events that might help cryptos pick up momentum and resume their journey to new heights.
What caused Bitcoin’s price to crash?
There’s no simple answer to this question. Otherwise, the crypto market would be easily predictable and we would all be millionaires. However, there were some telltale signs that hinted at a solid price correction, including:
- Elon Musk’s Tesla backtracking on their decision to accept Bitcoin as a method of payment for their vehicles. The decision was influenced by the huge amount of coal-generated electricity that is supposedly used for mining bitcoin.
- An increasing number of FUD (fear, uncertainty, and doubt) regarding bitcoin mining and usage in China.
- Hints to new regulative measures from the ECB and the FED regarding cryptocurrencies.
- Too many longs on leverage getting liquidated, creating a cascading price crash.
And while most of these so-called reasons were debunked quickly after they surfaced, the damage was already done. The sheer volume of FUD kept on coming, pushing the prices to new lows each time around.
Main reasons why the market might pick up once again
With all that said, we shouldn’t erect a tombstone to the current bull run just yet.
There are some upcoming events in the crypto industry, as well as some ongoing factors
that show us that price action might pick up sooner rather than later.
Institutional interest is not weakening
While many retail investors chose to drop their crypto assets for less volatile investments in the short term, institutional investors haven’t stopped buying Bitcoin.
Since the crash, Michael Saylor’s MicroStrategy has acquired an additional $25 million worth of Bitcoin in May 2021. Additionally, the company plans on purchasing another $500 million in the upcoming months.
Grayscale, a major crypto hedge fund also added $2 billion worth of BTC on their balance sheet.
Tesla hints at accepting BTC once again
Elon Musk tweeted just recently that Tesla doesn’t plan on selling their Bitcoin and that they are invested long term in the cryptocurrency.
More importantly, he hinted that the company will once again consider accepting it as a method of payment once at least 50% of Bitcoin mining operations are getting their energy from renewable sources.
Bitcoin becomes legal tender in El Salvador
The biggest piece of positive news in the market is that the small South American country of El Salvador legalized Bitcoin and now considers it legal tender. This seems to have spurred a movement in neighboring countries like Mexico and Chile that are seriously considering following this move.
On the other side of the globe, the Tanzanian government has shown interest in the widespread adoption of cryptocurrencies, with the goal to promote financial inclusiveness for everyone in the country.
The Bitcoin crash of May 2021 hurt many investors that were hoping to see a 6-figure bitcoin before the end of the summer. While this outcome might still come to fruition, the recent correction was a harsh reality check for many.
However, the flux of good news seems to be picking up, and investors are slowly abandoning fear for greed in the markets. Consequently, we could see Bitcoin reenter its bullish cycle and lead the way for altcoins to follow.