Bitcoin Takes A Dive

As another weekend approaches it’s once again time to take stock of the week’s performance. As ever, I’ve been chatting to traders about the big moves they’ve been involved in and more importantly the ones they wish they’d been involved in and the move everyone is talking about, it seems, is the more than 30% plunge in Bitcoin. It seems the age-old adage of what goes up must come down is appropriate here given the heavy slide seen in the crypto currency this week. So, if you were in the move, well traded and if not, better luck next week. Let’s walk through what happened…

What Caused the Move?

There have been a number of factors that have weighed on Bitcoin this week but chief among them is the controversy around Elon Musk. Last year and earlier this year, Bitcoin was driven into the stratosphere on the back of tweets from the Tesla CEO endorsing the digital currency. Earlier this year, Musk tweeted that Tesla had purchased $1.5 billion worth of Bitcoin and that the company would now be accepting Bitcoin as payment.

Tesla To No Longer Accept Bitcoin

This week however, it seems there has been an about-turn at Tesla. Over the weekend, Musk seemed to imply that Tesla had sold its Bitcoin holdings. This caused the market to gap lower at the open on Monday. While Musk then confirmed that Tesla hadn’t sold its holdings, he did announce that Tesla would no longer be accepting Bitcoin as payment.

China Crypto Crackdown

Losing the endorsement of Tesla has struck a major blow to Bitcoin given that this was its biggest inroad into the mainstream to date. Adding to Bitcoins woes this week was the announcement from China that it would be cracking down on digital payments. While citizens will be allowed to own cryptocurrencies, they will not be able to use them as payment.

Environmental Concerns

There is also a growing conversation around the potential negative environmental impact of Bitcoin and cryptocurrencies in general. A huge amount of energy is used in Bitcoin farms where computers mine Bitcoins. Musk has commented on the environmental impact of Bitcoin, citing it as a reason for Tesla dropping the digital currency. Looking ahead, the growing focus on this issue could cause bigger problems for crypto currencies.

So, that’s the fundamental backdrop, let’s now take a look at the technical picture.

Technical Views

Bitcoin

The sell-off in Bitcoin over recent months has seen price breaking down through the bull channel and through several major support levels. The decline was halted into a test of the 30990 level as buyers stepped back through for now, the rally is paused at the 42980 level. If price can break back above here, bulls will be looking to challenge the 50510 level next. To the downside, below 30990, 20465 is the next big support to note.

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