The Crypto Slump Explained

Crypto has been having a wild few weeks, to say the least. So, let’s explain what’s happening and where this may be heading. Once we’ve covered that, we’ll dip into some of the key fundamental events happening this week.

Let’s do this.

The Crypto Crash

Whatever side you were on, the numbers began tumbling faster than we’ve seen for a little while. At the time of writing, Bitcoin (BTC) and Ethereum (ETH) are both down around 30% since mid-May. While the overall crypto market cap dropped by a ridiculous 51.68% at its lowest point. Ouch.

Source: Coinmarketcap

As you can see, things did recover slightly from that drop, but the market cap still sits some 41% down from mid-May highs, at the time of writing.

Why did Crypto drop?

Now the dust has settled a bit, the picture is slightly clearer.

One influencing factor was Elon Musk’s announcement that Tesla would be suspending its acceptance of Bitcoin as a form of payment over fears related to its potential impact on the environment.

Many see the adoption of Bitcoin by major retailers and household brands as key to crypto’s wider acceptance as a legitimate form of currency or payment. With Tesla so clearly distancing itself from the crypto, many began to worry that this might cause a domino effect. Many were also furious at Musk for again appearing to manipulate the market to suit his own purpose.

Coincidently, around the same time that this was happening, China began cracking down on cryptocurrency as well. While China, not known for its freedoms, has long stood against crypto, it recently announced that it would beef up its penalties for those caught mining Bitcoin. It’s estimated that 75 per cent of all Bitcoin mining happens in China, and many feared that this crackdown could affect the global crypto market.

What’s the outlook for crypto?

The speed of that 10% recovery last week is mighty important, too. It shows investor resilience and just how mature this market has become over the last few years. Where some saw this as Doomsday and jumped to sell, many other investors watched, waited and made their move when they saw the trend bottoming out.

It’s this kind of behaviour that stands crypto in good stead of the future. Trading is all about seizing opportunities when they’re presented to you. This was a good test for the market and it looks like it passed. Not exactly with flying colours, we might add, this was a B- effort at best.

Looking at the wider picture, the slow but very definite bounce back should be seen as a triumph. As for the mining situation, it’s almost certain that people will continue to find a way, just as they have previously.

And a final point on Elon — he’s already started a dialogue with US-based BTC miners over the use of more renewable forms of energy for mining.

Storm in a teacup? Maybe.

What’s on the trading agenda this week?

Monday

● EUR — German Inflation Rate YoY Prel (MAY)

Tuesday

● EUR — Unemployment Change (MAY)

● EUR — Core Inflation Rate YoY Flash (MAY)

● CAD — GDP Growth Rate Annualized (Q1); GDP Growth Rate QoQ (Q1)

● USD — Markit Manufacturing PMI Final (MAY); ISM Manufacturing PMI (MAY)

Wednesday

Thursday

Friday

● USD — Non-Farm Payrolls (MAY); Unemployment Rate (MAY)

Here at Contentworks we closely follow market movements and prep content that we think your traders would love to read. Let’s get you started right here.

Speak soon!

The Contentworks team

Contentworks is a content marketing agency that's all about telling your story and achieving your goals. Unless you want to climb Everest.