At the beginning of the month, the crypto world was still full of euphoria. New investors flocked to the markets, the leading altcoins marked new highs, and many expected Ethereum to continue to grow in value. However, the euphoria has subsided in the meantime — after all, the markets corrected within a few day’s start.
We now want to take a look at the fundamental situation and check whether we have a chance to “buy the dip” or whether we are heading into a prolonged market correction.
Elon Musk initiated the start of the ongoing correction on May 13, 2021. With his tweet that Tesla would suspend payments using Bitcoin, Musk sent investors into a panic.
The consequence of the tweet was a correction, which most investors still dismissed as a short dip. For Elon Musk, it was clear for the time being that Bitcoin is a cryptocurrency that cannot be reconciled with the mission of the electric pioneer Tesla — at least as long as renewable energy sources do not have a significant share in the energy mix.
Nonetheless, Musk also indicated that Tesla would not sell its Bitcoin. According to him, the company has “diamond hands.” This means a short break for the rapid sell-off.
So for Elon Musk, Bitcoin continues to be a relevant asset. After all, Tesla has invested about $1.5 billion of its liquidity in the digital asset.
From my personal perspective, there are some important aspects investors need to consider before buying or selling cryptocurrencies based on Musk’s tweets:
Musk the person
Elon Musk is arguably one of the most visionary entrepreneurs of our time. Accordingly, it seems illogical that Musk did not look into the sustainability of the asset himself before investing in BTC.
Dispute with the SEC
Elon Musk has already had disputes with the SEC in the past. The reason was price manipulation of listed companies. His famous tweet announcing the delisting of Tesla even led to an SEC complaint. Cryptocurrencies are not SEC-regulated, so Musk can tweet here without facing the consequences.
Long-term perspective
In the end, Musk also assumes that cryptocurrencies will play a supporting role in the future. This also corresponds to the expectations of numerous experts. Short-term fluctuations are normal in these re-regulated markets.
However, Elon Musk’s tweets were not the end of the story surrounding the current market correction. Rather, the Chinese government has spoken out about the ongoing speculation surrounding cryptocurrencies and announced that there would be further tightening within China.
From my personal perspective, two developments are coming together at this point. On the one hand, investors have only known rising prices in recent months. The current price correction has therefore increased uncertainty among new investors. In addition, China, the world’s second-largest economy, has now come up with the idea of regulating cryptocurrencies even more.
Recently, cryptocurrency prices have skyrocketed and plummeted, and speculative trading in cryptocurrencies has rebounded, seriously hurting people’s property security and disrupting the normal economic and financial order — People’s Bank of China (PBOC)
On Tuesday, May 18, 2021, three financial associations in China urged their members to stop crypto-related services. The companies addressed include banks and payment service providers.
The services to be discontinued are account creations, registrations, cryptocurrency trading, crypto transaction settlement, and insurance services. Thus, a further tightening of the 2017 ban is now taking place in the midst of a bullish market phase.
The original statement on cryptocurrency regulation came from the People’s Bank of China’s central bank. The PBOC also stated that companies are not allowed to accept cryptocurrencies as digital currency. They are also not allowed to use cryptocurrencies as a means of payment.
Additionally, companies are not allowed to support trading between fiat money like the yuan and cryptocurrencies. As part of this, Chinese companies have also been prohibited from setting up crypto accounts, funds, or other financial products.
For private investors in China, the new law does not mean any particular tightening of the status quo. Owning cryptocurrencies in China is still allowed.
Until now, cryptocurrencies have not posed much of a challenge in China. However, the Bitcoin bull run has rekindled interest in Bitcoin trading. For the government, the interest was reason enough to counteract this development. After all, speculation could contribute to people losing their wealth and the economy being affected.
Platforms such as Huobi and OKEx have gained extreme interest. Over-the-counter (OTC) trading has also gained a lot of relevance. In the future, these services may no longer be offered by the companies. Thus, Huobi already announced that mining in China would be discontinued.
In China, cryptocurrencies are not legal currency, and banks are also not allowed to accept digital assets as a means of payment.
However, regulation was much friendlier in 2013. Thus, BTC was considered an asset, and the Chinese were allowed to trade it. However, the PBOC banned banks and financial service providers from offering crypto services in the same year.
In 2017 — where the Bitcoin bull cycle famously took place — the Chinese government banned Initial Coin Offerings (ICO). This was done to protect investors and preserve the country’s financial stability.
At the same time, the ban on ICOs also covers the exchange of fiat money for cryptocurrencies and vice versa. This move also led to numerous platforms exiting China.
Figures published by the PBOC show how big the cuts were at the time. According to these, a whole 85 ICO platforms, and 85 trading venues, had said goodbye to the market by July 2018.
Finally, the cherry on top of the cream cake was provided by the current US President, Joe Biden. He is calling for more government control of crypto transactions. In concrete terms, this means that Biden wants to take action against illegal money laundering.
In the future, the IRS would have to be informed about transfers that exceed a volume of 10,000 US dollars.
This step is understandable in my view because cryptocurrencies are rapidly developing into an important asset class. Accordingly, Biden’s primary intention is to respond to this market growth.
However, in the midst of an uncertain market environment, the announcement has helped cryptocurrencies consolidate. From my personal perspective, this is not really negative news — after all, the same regulations apply to other assets such as stocks.
Moreover, regulatory documentation for investors is a sign that cryptocurrencies are increasingly becoming the focus of regulators.
As is well known, this is the point where opinions differ. From my personal point of view, we are still in an intact upward movement.
Moreover, the market has changed a lot in the past few years. The market’s infrastructure is better than ever before, and institutional investors have also taken their first steps in the crypto market.
From there, I see the current development more as a short-term overreaction of the market. Bitcoin continues to be a digital asset that can function as a hedge to the fiat system. Ether is the fuel of the largest blockchain network and continues to be scarce.
More and more people are looking for investment alternatives and investing in cryptocurrencies and DeFi platforms. Accordingly, the rapid crash could be followed by a comparably rapid recovery.
The current crash illustrates that private investors do not act particularly rationally in the market. Rising prices attract the attention of the market — investors start to invest. When prices fall, investors initially hold on to the stocks, but at a later stage, these investors lose confidence.
Your money is not gone, my friend, only someone else has it.
Mayer Amschel Rothschild
Despite its age, Rothschild’s quote clarifies that the same problem has always accompanied us, humans. Investors must learn to seize opportunities as they arise.
Those who only invest in the market when the waters are calm and are bent on short-term speculation can quickly lose confidence in their investment. Selling at the wrong time is then the culmination of wrong actions.
In addition, the principle applies that only those who also part with the position lose their capital. At this point, the money is no longer in one’s own assets but has migrated to another investor or investors by selling the assets.
Thus, from my personal point of view, the rule is quite simple. Investors should use the current opportunity to buy into the low prices. Positive news could fuel the market again and lead to rising prices.
The last important question, which I would like to address, is the question of “who.” Who should invest and who should keep their hands off the current market?
From my perspective, investors who check the current prices on a daily or minute-by-minute basis should not invest in volatile crypto stocks. The reason for this is the wide range of fluctuation. Investors who do not bring along holding period can panic and sell their cryptocurrencies.
In addition, it is currently a question of alternatives. Who invests in cryptocurrencies buys a risky but high-yield asset class. Accordingly, in phases of weak and volatile markets, some patience is also necessary.
In our view, there is a suitable answer to the “buy the dip” or sell your own cryptocurrencies question addressed at the entrance.
Investors with some free capital and high-risk tolerance can buy the Dip without any problems. In a few months, we could already recapture the growth trend.
Due to the strong fundamental development, it can generally be assumed that we will not see any lower entry opportunities in the coming months and years.
In the long term, buying at current levels should be worthwhile. Risk-averse investors should instead invest in equities and funds. These small fluctuations are where day traders tend to make most of their profits. To predict these fluctuations, you need to examine the past, which requires technical analysis.
The analysis involves using graphs and charts to look at the value of a coin over a specific period. To detect statistical trends for short-term trading, you need to use the right timeframe. You may need to look at trends over hours, days, weeks, or months.
Technical analysis also involves historical research. When analyzing the market, we consider how coins have performed in the past and how quickly they course-correct after a major shift up or down.
Fatpigsignals create crypto trading suggestions based on careful research using the steps discussed. You can count on skilled traders to make the most accurate predictions.
As with predicting the weather, you cannot be right 100% of the time. However, their proven systems help increase the odds in your favor.
Stop making your trades based on emotion. Use the expert trading signals from Fatpigsignals to determine when it’s the right time to buy or sell.
Keeping track of the market on your own is never easy. There are many moving parts and thousands of coins to monitor. Besides reading graphs and candlestick charts, you need to pay attention to the news, the economy, and any other developments in the world of cryptocurrency.
Through the daily reports, YouTube live streams, Telegram Private group, and Facebook group, you receive regular market updates. Stay informed and receive expert picks to improve your odds of making a profit.
I share more intimate thoughts in a monthly newsletter that you can check out here. Please let me know in a comment, and let’s build your crypto universe via Patreon. Join me on various social media platforms:
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