17.05.202116:49 Forex Analysis & Reviews: BTC dropped to February low: why cryptocurrency prices continue to fall

The main cryptocurrency had all the prerequisites to successfully test the $60,000 mark over the weekend, but instead, the asset began to rapidly decline in price. Bitcoin dropped to $42,000 for the first time since February 2021. The main problem of the asset can be called not so much an unpleasant news background, but an unhealthy reaction of the cryptocurrency.

Last week, the main source of unpleasant news related to bitcoin was the statements of the United States and South Korean authorities, as well as Telsa CEO Elon Musk. The latter had the greatest impact on the decline in asset prices and its subsequent problems. On Twitter, the billionaire criticized BTC, calling it a centralized asset controlled by a small number of mining companies. Musk also mentioned the flooding of a mine in the Chinese province of Xinjiang, which led to an aggravation of the cryptocurrency market correction and a 35% drop in hash rate. After that, bitcoin quotes began to fall to the local level of $42,000. Users and market participants believed that the sale organized by Telsa was to blame. However, Elon Musk soon denied this rumor and once again spoke unflatteringly about the first cryptocurrency.

As a result, as of 10:00 UTC on May 17, the BTC/USD pair is quoted at the level of $45,000. Over the past day, the price of the cryptocurrency has sunk 10%, and the dynamics of price changes for the week is -22.6%, which is a huge result for a cryptocurrency with such a capitalization. The sharp collapse in the price of BTC provoked significant losses among traders. Over the past 24 hours, crypto exchanges were forced to liquidate the longs of more than 300,000 users, which is why the total losses on BTC/USD trading reached $1.26 billion. The record loss of one trader was $90 million.

Bitcoin continues to approach a safe position, around $45,000, but there are all the prerequisites for a deeper correction. This is due to the unusual behavior of the asset and its unhealthy reaction to a chain of negative news announcements. It can be assumed that BTC has become a less stable asset, which is very sensitive to the pessimistic agenda. At the same time, there is a chain reaction when negative news comes one after another and significantly aggravates the situation of the cryptocurrency. It was the "bitcoin chain reaction" factor that caused the asset's quotes to fall to $42,000. There is no doubt that the cryptocurrency will recover its performance due to the influx of new users and a favorable level for entering BTC. However, interest in bitcoin is beginning to fall due to the current period of special sensitivity, which can deepen the correction to $30,000-$35,000 with one negative announcement.

At the same time, there are the first signs that bitcoin is beginning to change. Mining companies, after harsh criticism of Elon Musk, are rushing to announce that they will soon become carbon-neutral and reduce emissions into the environment. In addition, Galaxy Digital conducted a study that states that the bitcoin network consumes less electricity than the banking sector. At the same time, the asset has a certain dissonance associated with the architecture of the cryptocurrency network: it is the consumption of electricity that makes operations in the BTC network reliable and secure.

Harsh criticism of Elon Musk and the tightening of regulation of cryptocurrencies in the United States and South Korea brought down bitcoin quotes. At the same time, one should not expect the onset of crypto winter on the market. Altcoins are still firmly on their feet, and recent stock market troubles have the potential to renew interest in BTC by hedging risks. In this situation, cryptocurrency quotes will begin to grow again. But if the news background continues to be saturated with a negative agenda, then we can expect a new year's minimum in bitcoin quotes.