Welcome to another weekly news update in the crypto space. There has been a dramatic turn of events starting last week with bitcoin experiencing a massive correction, and with many altcoins tumbling along.

It’s fair to say that there is a mix of sentiments in the market, as regulatory news creates a level of fear, uncertainty, and doubt (FUD), which prompts newcomers to sell while long-term investors scramble to accumulate further in the discount crypto market.

Crypto market by the numbers

Bitcoin price fell to a new 3-month low at around USD $29,000 on Wednesday, 19 May 2021. The sold-off happened between 12:00 to 13:00 UTC, pushing the price a further 20% from its 20-day moving average.

However, it looks like the market has already anticipated this as the price drop began just a week before then. On 13 May, the coin’s price fell sharply to $45,000, signaling the beginning of the bear move as this price exceeded the new-month low.

Bitcoin, having the highest market capitalisation of all, appears to lead the bear run, as buyers of altcoins sell since the 13th of May. At the time of writing, Ethereum (ether) is back to the same price as it had almost exactly one month ago, at USD $2300.

The same thing happened with Ripple’s XRP, currently floating at 90 US cents, which is the same price as it had in mid-April. Cardano faced a short-lived bull run, although it is currently up 40% since 19 May.

China’s crackdown on crypto miners shouldn’t be a concern

When it comes to the overall activity of the crypto market, we often talk about bitcoin first. Although stablecoins like the USDT have been predominantly used to trade the various crypto tokens in exchanges, BTC is also frequently used as the main currency in the space.

It’s not uncommon for traders to trade BTC pairs as many altcoins are measured in BTC terms. This is also useful to reduce the volatility that is normally found at the border between centralised and decentralised economies. News on bitcoin receives a lot of attention.

The strongest FUD pertaining to bitcoin comes from China’s new regulatory move to crackdown on Chinese crypto miners. The State Council Liu He said in a statement that it is necessary to “crackdown on Bitcoin mining and trading behavior, and resolutely prevent the transmission of individual risks to the social field.”

Although the Chinese government has had negative sentiments around tools for a decentralised economy, such as cryptocurrencies, crypto mining has been a prevalent activity as there is an overabundance of hydroelectric and coal power in the country’s western and southern regions.

Previously, the legal status of crypto mining was unclear. Authorities seem to have tolerated it. This is apparent from the fact that the state-owned national television had no issue with covering a story about a mining equipment salesman.

According to NBC, crypto mining is a big business in China, and consequently, 70% of the world’s supply of cryptocurrencies comes from the country.

Interestingly, the article states that crypto miners are unfazed with the news because a crackdown would likely be very difficult to achieve as transactions are nearly impossible to be traced on the blockchain.

Furthermore, Mike Colyer of the US-based crypto mining firm Foundry says that more hashrate (the measure of computational power to mine cryptocurrencies) is now moving to the U.S., distributing the production power of cryptocurrencies.

In the interview with Coindesk, Colyer seems not concerned with China’s apparent ‘monopoly’ on cryptocurrency production.

“China does have a lot of the hashrate; yes, it does have a monopoly right now on the pools or it did have a monopoly on the pools,” he said. “If all of a sudden China says we now control 60% of the Bitcoin network and we’re going to 51% attack it, naturally we’re going to see a fork in Bitcoin. There’s going to be a China version and there’s going to be a rest-of-the-world version.”

China’s Central Bank is currently developing a blockchain-based digital yuan. Although decentralised cryptocurrencies were claimed to threaten the national security of various powerful countries, including the United States, there is currently no concern about a possible threat to the decentralised networks posed by these countries.

“Crypto influencers” will lose their influence in the long run

The cryptocurrency market is open for all. This has some beneficial effects in that anyone can participate in a decentralised economy that is fair, transparent, and unregulated. However, the consequence of allowing literally anyone into a system is that there will be people who buy cryptocurrencies for a variety of reasons.

The worst reason to buy an asset is because of fear of missing out, and hopping into the bandwagon because many people do so. Social media has a way to make prices of crypto assets move to unexpected directions.

On Twitter, Tesla CEO Elon Musk has become the reason why bitcoin and dogecoin increased in popularity. When Tesla announced to buy $1.5 billion worth of bitcoin, some other companies (and celebrities) were inspired to do the same.

Tesla wasn’t the first, though. MicroStrategy was the first publicly listed company to make an even larger purchase of bitcoin, at 90,000 bitcoins as of February 2021.

Institutions are more disciplined and calculative when it comes to purchasing assets. The same cannot be said for retail investors, especially those who are still inexperienced in the crypto market.

Naturally, those who first entered the market may try trading cryptocurrencies, and following the news to take advantage of social media hype. Of course, the retail crypto market that trusts in a human will face the inevitable consequence when his or her sentiment shifts.

Elon Musk announced on Twitter that Tesla will suspend payment in bitcoin for its vehicles due to environmental concerns. Unsurprisingly, this caused market sentiment to fall on the bearish side. He receives a lot of criticism from traders, as they think that no person should have this much influence over the price of such volatile assets.

Vitalik Buterin, the co-founder of Ethereum, believes that the market will learn from its mistakes. “I think it’s reasonable to expect a bit of craziness,” he told CNN. “But I do think that the markets will learn. Elon is not going to have this influence forever.”

While there are many who have negative opinions about Musk, perhaps speculating that the tech billionaire is up for a pump-and-dump scheme, Buterin is certain that Musk has no malevolent intentions.

“[He] runs Tesla and SpaceX and all these things, doesn’t change the fact that ultimately he’s a human – and humans get excited about doge coins. That’s just a thing that humans get excited about. I don’t think that Elon has a kind of malevolent intent in any of this.”

Buying the dip

Amid the bull run, new investors seem to forget that the crypto market is volatile — far more volatile than any asset in existence. If they have had experience in the stock market (i.e. if they at least have held shares of stock), then there is less likelihood for a sell-off, if they believe in the long-term future value of cryptocurrencies.

It is a fact that bitcoin has gone through several bubbles, with the most recent one happening back in 2017. Those who purchased bitcoin at the 2017 all-time high, for example, would have seen a 200% return if they had sold them at the $64,000 all-time high.

Crypto ‘veterans’ of the 2017 crash and even some of the early bidders of the cryptocurrency in September are likely to be happy that the price finally corrected. With cryptocurrencies selling at a discount, an increasing number of long-term holders will own cryptocurrencies.

Over time, the market should learn that the cryptocurrency market is not only a place of quick gains and loss. It is also a valuable market that opens the door to new long-term opportunities.

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