Where are cryptocurrencies heading?

Last week, most of the cryptocurrencies were suddenly put under strong selling pressure due to 2really impactful events. Although news from the beginning of the week were not very positive for the market, investor confidence was still relatively high. Eventually, the correction turned into a strong sell-off, which continued over the weekend, but at the same time, we can see signs of stabilization. What will be the further development of Bitcoin and other cryptocurrencies?

Bad news all the way

Prices have been under pressure since the beginning of last week when Elon Musk first announced that Tesla was not going to accept bitcoin as payment for cars anymore. Although Musk refuted speculation about the possible sale of bitcoins on Twitter, the market was not able to withstand the events which were about to happen. China's central bank PBOC has issued a warning to financial institutions in the country not to accept digital currency as a form of payment. At the same time, China imposed restrictions on cryptocurrency mining, which was too much for the market, and Bitcoin fell another 30% at one point.

Meanwhile, the US Treasury Department has confirmed its sensitivity to the extremely growing market and is proposing a special tax. However, this will not affect only cryptocurrencies, as countless institutions have entered the market in recent months, and nervousness has also affected the stock or bond markets.

Chart: Daily BTCUSD chart (zdroj: tradingview.com)

What now?

However, where the price of Bitcoin and other cryptocurrencies will go in the short-term horizon isno longer so clear. Musk expressed his support for the cryptocurrency market last week, confirming that Tesla had no plans to sell bitcoin. It is Musk’s unpredictable internet activity that makes it really difficult to predict where the market will decide to move. The market will be very happy to continue to follow his orders. Let’s hope that it will not end in tears for Musk and his followers and the market will start another rally, as we could witness happening repeatedly several times after a bigger slump took place.

However, increasing regulation is not good news, and it is possible that the market is facing somevery difficult weeks, during which it may be preparing more bull traps for retail traders. After the end of the great "hype", the big players who know very well how to make money on the current situation will take over the reins. This year's highs are a very distant goal for Bitcoin and the market will probably find a "fair price" a little lower, where it will stay for a while.

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