Note that the market crash occurred in the early hours of Saturday, December 4. Then Bitcoin collapsed to the local bottom at $42,000 and traditionally pulled other cryptocurrencies with it. That morning, coin rates looked like this.


Cryptocurrency exchange rates on the morning of December fourth

That said, the market continues to look bad. Just look at the situation of the largest cryptocurrencies by market capitalization to see this. Many of them are still down more than ten percent over the course of a week – and sometimes even a day.

Ranking cryptocurrencies by capitalisation

On top of that, the so-called Fear and Greed Index now stands at 16 out of 100. Which means that investors are really scared of the current situation and are in no hurry to get involved with the crypto market by exiting Stablecoin.

Fear and Greed Index score

What will happen to the price of Bitcoin?

As noted by journalists at news outlet Cointelegraph, the collapse of the coins was accompanied by the liquidation of $2.5 billion worth of traders’ long positions. This included what is known as a cascade of liquidations. This is a process in which exchanges forcibly close leveraged positions, causing the price movement of an asset to accelerate in one direction.

In other words, a significant decline in the market provokes an even greater collapse, as a decrease in the rate forces the sale of large positions of other traders. This means that there is a sort of a vicious circle. It lasts up to normalization of price and final sale of coins by all interested persons.

Volume of liquidation of margin positions

According to the cryptoanalyst under the nickname filbfilb, the level of $50,000 may become “the next major resistance for quite a long time”. Accordingly, it will take not only a certain period to overcome it, but also the efforts of investors who will gradually raise the price of cryptocurrencies with their purchases. The expert continues.

Given the scale of the collapse and subsequent sales of BTC, we are likely to see Bitcoin price consolidation until at least the first quarter of 2022. The auspices aren’t over yet, but it may seem to some that the growth cycle is already over.

Indeed, Bitcoin still looks bullish for now - at least on a large scale chart. However, many traders and investors have opted to get out of the game to avoid losing more money. In addition, they are not rushing into new positions, for fear of a further market collapse on the back of the general instability in the world economy.

Chart

Incidentally, the market crash “wiped out” another important record for the crypto industry – Bitcoin’s capitalisation has now fallen below a trillion dollars again. Recall that this line was an important frontier for many investors, who relied on it as a psychological support level to continue the bull run.

Accordingly, the current situation in the coin market has affected the confidence of some investors. Still, their expectations of what was happening proved to be irrelevant and invalid.

Bitcoin’s fall

So far Bitcoin has held above $40,000 and this line has been “mirrored” by the bulls quite quickly. In other words, there is still demand for the cryptocurrency – and even at the national level. Over the weekend, El Salvador’s President Nayib Buquele announced on his Twitter that the country had bought another 150 BTC for its cryptocurrency reserves. Indeed, Bitcoin as a whole became official tender in El Salvador in early September.

According to Buquelet, Salvadorans were lucky enough to buy BTC “cheaper”. That is, the president expects the value of the digital asset to rise and sees this correction as a short-term local phenomenon. With the latest purchase, El Salvador’s cryptocurrency reserves have increased to 1,270 BTC or $60.3 million at the current Bitcoin exchange rate.

Nayib Bukele’s tweet about buying bitcoins


In the end, the experts' view is that the market will take some time to stabilise after such a dramatic collapse. We believe that Bitcoin's price will continue to balance in its current zone. In addition, there may be some dips, because the niche is full of newcomers, who bought BTC higher and now want to get rid of it, when it grows to a more or less adequate level for them. This means that the scenario of another panic attack on the market is still relevant.

Be that as it may, make all investment decisions on your own after personally analysing the market. You will then be solely responsible for the fate of your cryptocurrency portfolio.


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