The last few days have been marked by a $10,000 drop in the main cryptocurrency. This event is directly related to the events in El Salvador, where the country's government decided to legalize bitcoin as a means of payment to combat the inflation of the national currency and save on cross-border transfers. However, masses in El Salvador immediately responded with a series of protests and rallies against this bitcoin imposition. Experts stressed that bitcoin is a failed experiment for El Salvador. Locals are already on the edge of poverty and do not want their salaries, pensions, and social benefits to depend on ultra volatile cryptocurrency.
However, the events in El Salvador could just be an impetus for bitcoin. The fact is that we have repeatedly questioned the validity of the last round of cryptocurrency growth. After the formation of an upward trend was completed by all signs, bitcoin suddenly increased by $20,000. There were no clear reasons and grounds for this, so we considered that this growth was completely illogical. It is likely that other market participants also counted. Therefore, El Salvador became only a formal reason to start selling bitcoin.
Meanwhile, Galaxy Digital CEO Mike Novogratz gave an "ingenious" explanation of why bitcoin fell. According to Novogratz, the cryptocurrency was heavily overbought after 2 months of growth and many market participants expected a correction. In principle, any movement of any asset in any market can be explained in this way. Also, some experts say that the fall of bitcoin was provoked by the sales of large miners, who, according to Glassnode, got rid of almost 3,000 coins last week. Also among the possible reasons is the beginning of an investigation by the U.S. Securities and Exchange Commission against several cryptocurrency exchanges and the restrictions imposed by some regulators on the activities against the Binance exchange.
All this, simply put, can be called a tightening of regulation of the cryptocurrency market and its participants. However, even if all these reasons are added together, it is still unclear why bitcoin has sunk so much. More precisely, even all these reasons combined do not pull on a drop of $10,000. Thus, from our point of view, the "chain reaction" is to blame because of the unreasonableness of the growth of bitcoin. The cryptocurrency again rose significantly from scratch, and when one of the major market participants sold a significant number of coins, the rest also rushed to do it, which brought down the exchange rate, which had been quite stable for two months and was not even too volatile.
The daily timeframe shows a drop of $10,000 in one day. The fall ended exactly near the line that used to be the border of the lateral expanding channel. One way or another, the further decline has been stopped for now and a possible entry into a new round of the downward movement should be monitored on the 4-hour timeframe.
