Bitcoin falls: Despite ending the year with an appreciation of more than 60%, Bitcoin (BTC) underwent major corrections and price drops in 2021. What goes up, must come down. And in bitcoin’s case, this was sometimes within the hour.
2021 has been a great year for the world’s leading cryptocurrency. Bitcoin hit a new all-time high, but that was also accompanied by sudden price drops. Traders and investors were certainly in their feelings about this, especially at the end of 2021.
Bitcoin has always been known for its strong volatility. While many investors make huge profits, billions of dollars can be liquidated overnight.
At the start of 2022, we can look back on the past year and take a look at the main failures of BTC and the lessons they can bring.
February – Elon Musk’s first negative effect on bitcoin
The first big, unexpected drop in BTC occurred in the last week of February, starting on the 22nd. The cryptocurrency was accumulating an appreciation of almost 80% during the month. This came about mostly due to the praise that Elon Musk and other personalities in the investment world were giving it.
Yet a simple tweet from the billionaire could change everything. After saying the prices of Bitcoin and Ethereum seemed too high, the price of the world’s leading cryptocurrency lost around $ 9,000 in a matter of hours, the biggest daily drop in its history to date.
The downward trend continued over the next few days, bringing BTC from $57,000 to a low of approximately $43,000 – a 25% devaluation in just one week.
The expiration of thousands of BTC contracts and statements by the US Secretary of the Treasury have also been attributed as the reasons for the decline in the price of the asset.
Bitcoin falls in April – euphoria attracts whales
Bitcoin managed to bounce back from its first big slump of the year. It hit a new record price of over $64,000 on April 14th. However, two days later, the asset entered a strong downtrend. It lost almost 30% in just 10 days.
Major altcoins have followed the downward movement of BTC. This cost the crypto market over $ 200 billion on the 18th alone. The main justification given for the sudden correction was the movement of the whales. They took advantage of retail investors who were in an extreme euphoria to buy the asset.
After this bearish period, general market sentiment reached the highest level of pessimism in a year. A possible increase in the US income tax, which could affect cryptocurrencies, was also used as justification for this correction period.
Bitcoin drops in May – Musk and China attack again
Bitcoin was showing signs of rebounding from its April slump until Elon Musk reappeared. On May 12, he announced that Tesla would no longer accept cryptocurrency as a form of payment. He claimed that BTC mining was harmful to the environment.
A few days later, the Chinese government again announced restrictive measures on Bitcoin mining and trading, starting a new wave of bans. As a result, the price of the cryptocurrency took its biggest drop this year. It plummeted from $57,000 to a low of $30,000 in just seven days.
Bitcoin drops in September – traders get greedy again
After closing July higher than 70%, Bitcoin suffered a sudden drop again in September. On the 8th, the cryptocurrency collapsed by more than 18% in a matter of hours, causing a liquidation of more than $ 4 billion.
As a result, the BTC started a downtrend that lasted for the rest of the month. In the days leading up to the drop, sentiment indicators showed that retail investors were once again extremely greedy in the market, providing the necessary liquidity for whales to dump large sell orders.
Bitcoin drops in December – new wave of covid-19 affects BTC
Bitcoin has been on a downtrend since November 10, after hitting a new all-time high of $ 69,000. However, a clear downward movement was observed on December 3. This resulted in an asset depreciation of around 25% in just 48 hours. The result was a liquidation of $ 1.8 billion in the market.
There were a few reasons for this correction: Actions of retail traders, the year-end period, and fears regarding a new wave of Covid-19 were among them.
What do Bitcoin crashes tell us?
Bitcoin will always go through periods of correction or downtrend, like virtually all financial assets. Therefore, traders and investors who intend to make a profit by investing in this asset should be prepared for these times.
Some lessons can be drawn from analyzing the main declines of BTC in 2021. There is one main reason that stands out. In the same way that government and large companies or individual announcements can positively impact the asset price, these organizations and individuals also have the power to momentarily drop any cryptocurrency. Therefore, it is necessary to be aware of what is happening around the world in relation to cryptocurrencies.
In addition, it is necessary to pay attention to the movement of whales and market sentiment. In times of great euphoria, these large BTC holders may execute large sell orders, causing the price of the cryptocurrency to drop sharply.
