Editor's Note: This article comes fromDC News（ID：shenliancaijing）, reprinted by Odaily with authorization.
Editor's Note: This article comes from
, reprinted by Odaily with authorization.
Bitcoin is still extending yesterday's decline.
After a brief correction after a sharp drop of $10,000 yesterday, Bitcoin has begun to falter again. At present, Bitcoin has fallen by 6%, reaching the $50,000 mark.
At the same time, "Bitcoin crash" ranked No. 4 on Sina Weibo.
This round of decline was so sudden that people were caught off guard.
After the big drop, we can't help but wonder, what caused this big drop? Where will Bitcoin and cryptocurrencies in general go after this? And what is the biggest risk of the bull market behind the flash drop of Bitcoin?
secondary titlea sudden plunge
Since yesterday, Bitcoin has plummeted from the highest price of US$58,326 to the lowest price of US$47,650, a single-day plunge of more than US$10,000, with a maximum drop of more than 20%.
According to statistics, on the day when Bitcoin plummeted, a total of 330,000 people on the entire network became victims of liquidation, and the largest single currency liquidation order was worth as much as 20.65 million US dollars.
In fact, not only did Bitcoin plummet, but last night, the global financial market experienced various corrections.
Both A-shares and Hong Kong stocks closed down. European indexes opened lower across the board and then fell further. The major indexes all fell by more than 1%. The three major U.S. stock index futures also fell significantly. The S&P 500 futures fell by nearly 1%, and the Nasdaq futures fell by more than 1%. 1%.
It is worth noting that during the decline of the global financial sector, the decline of blockchain concept stocks and technology stocks was particularly obvious.
Among them, Canaan Technology closed down 15.89%, the share price of cryptocurrency mining company RiotBlockchain fell 11.06%, and MarathonPatent fell 10.21%.
At the same time, the blockchain concept stocks living in Hong Kong stocks were also not immune. Huobi Technology fell by nearly 15%, Okey Cloud Chain fell by nearly 14%, and Xiong’an Technology fell by more than 7%.
The global financial market, whether it is the stock market or the currency circle, has ushered in a sharp drop.
secondary title
Two potential risks to the current bull market
There are different opinions on the reasons for this Bitcoin crash.
The words of the new U.S. Treasury Secretary Yellen are considered a signal: Bitcoin is often used for illegal financing, its application efficiency is low, Bitcoin is highly speculative, and investors should be careful. Digital currencies could lead to faster, lower-cost payments, but many issues require research, including consumer protection, money laundering.
In fact, this is not the first time Yellen has expressed concerns about Bitcoin. When she testified before the U.S. Senate in January of this year, she reiterated her belief that the use of bitcoin is an illegal transaction. At that time, the price of Bitcoin also experienced a brief correction.
In addition, Yellen hinted that the Biden administration supports research on the feasibility of a digital dollar, contrary to the decline of interest during the period of former Treasury Secretary Steven Mnuchin; this also indirectly reduces the attractiveness of Bitcoin.
Speaking at a virtual conference hosted by The New York Times on Monday, Yellen said it makes sense for central banks to study issuing sovereign digital currencies. A digital dollar could help address barriers to financial inclusion for low-income households in the United States.
Behind Yellen's remarks is the problem that Bitcoin has always faced-regulation. Especially after its market value exceeds one trillion yuan and is recognized and accepted by more and more large companies and institutions, the direction of regulation is one of the huge risks.
On February 14 this year, US SEC official Hester Peirce stated that since major companies such as Tesla, Bank of New York Mellon and MasterCard all support cryptocurrency as an alternative asset class, there is an urgent need for a clear cryptocurrency regulation. system.
In addition, on the eve of the Bitcoin crash, South Korean financial regulators introduced new regulatory measures for cryptocurrency exchanges, requiring exchanges to mark and notify their platforms of any seemingly abnormal transactions within three working days. .
In addition, the Securities and Exchange Commission of India also stated on February 22 that holding cryptocurrencies is a "dangerous signal" and that Indian companies should completely abandon their holdings of cryptocurrencies before applying for listing.
Coincidentally, on the same day, the British financial and economic company IG Group, affected by the ban of the British Financial Market Conduct Authority, announced that it would stop providing encrypted derivatives services to retail users.
Earlier, due to Musk's "calling" behavior in Bitcoin, many industry insiders, including "Dr. The tweet is an act of market manipulation and should be investigated by the SEC.
And trader Peter Brandt is even more "alarmist" today, warning cryptocurrency investors to look back at the history of gold. In theory, Bitcoin may be banned. Historically, in 1933, US President Roosevelt signed a bill confiscating gold bars and declaring the possession of gold bars illegal.
In addition, another risk to the development of the Bitcoin market is the Fed's fiscal and monetary policies.
After the outbreak of the new crown pneumonia epidemic, the global flood has provided sufficient financial support for the global financial market and the bull market of Bitcoin, such as the United States.
After entering March 2020, because the Federal Reserve launched an unlimited QE policy and the United States launched a large-scale economic stimulus plan, the market liquidity increased and the U.S. dollar continued to depreciate. Currency markets continued to rise.
Former U.S. Treasury Secretary Larry Summers previously said that U.S. President Joe Biden's $1.9 trillion bailout plan risks injecting too much cash into the real economy, tempting the economy to exceed its capacity ceiling and sparking inflation. Driven by the dual impetus of economic overheating and rising prices, the Fed is likely to be forced to raise interest rates earlier than market expectations, and he believes that it is likely to take interest rate hikes before the end of 2022.
Meanwhile, U.S. money markets are betting on a 70% chance the Fed will raise rates by 25 basis points by the end of 2022, up from around 50% last week. Praveen Korapaty, a strategist at Goldman Sachs Group Inc., said the Fed's desire to end its asset purchase program before starting to raise interest rates means that the earliest feasible time to raise interest rates is around late 2022.
Yellen also said in an interview with reporters that the current federal debt interest payment accounts for about 2% of GDP, and this figure is similar to that before the Fed began to raise interest rates sharply in 2007.
Once the Fed raises interest rates, it means that market liquidity will decrease and the dollar will strengthen. The phenomenon of capital outflow from the stock market will be more obvious, and the stock market will fall.
As the time for the boots to hit the ground became more and more certain, the entire financial market also responded accordingly, as evidenced by yesterday's plunge in the global market.
However, it is worth noting that since the 3.12 black swan incident, and with the strong entry of international giants such as Grayscale, MicroStrategy, and Tesla, the relationship between Bitcoin and the entire cryptocurrency market and the traditional financial market has long intimacy".
Bitcoin has not been immune to the fall in financial markets.
Finally, the rising Bitcoin also faces a potential test of declining market liquidity.
According to Nikolaos Panigirtzoglou, a strategist at JPMorgan Chase & Co., bitcoin has roughly tripled in the past three months, but liquidity in the bitcoin market has deteriorated.
Previously, Nikolaos stated in a report on February 19 that at present, the liquidity of the bitcoin market is much lower than that of gold or the S & P 500 index, which means that even small capital flows can have a significant impact on prices. New investors in Bitcoin should be prepared for wild swings where the price could plummet, as it has in previous pumps.”
However, despite the risks, even though Bitcoin has plummeted, there is no need to be overly pessimistic.
Zhai Zhenlin of Mizuki Weiming Fund once said that from a technical analysis point of view, Bitcoin is currently at the end of the third wave of the five bull market waves, and it may peak and fall in the short term. After adjustment, it is expected to continue to rise in the second half of the year. Moreover, the market is currently in a speculative stage, and there is no signal that the bull market has peaked.
As Tyler Winklevoss, one of the founders of Gemini, said, Bitcoin has always been two steps forward, one step back, and then two steps forward. Very few people understand this.
Last year’s global flood, coupled with the launch of Grayscale and Paypal compliant investment channels, coupled with the demonstration effect of technology giants such as Tesla and Twitter, not only brought sufficient funds to the cryptocurrency market, but also made Bitcoin and the whole concept of cryptocurrencies is being promoted to a greater extent around the world.
Today is different from the past. In any case, although the current Bitcoin and the entire cryptocurrency market are still being criticized, the entry of many institutions and the huge market value are showing the rationality of its existence to the world.
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And we are in it, what we need to pay attention to is the impact of global economic trends and regulatory policy changes on the Bitcoin and cryptocurrency markets.
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