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It’s all about Elon, as Twitter serves as a backdrop to a continuing feud between hodlers and the “Dogefather.”
Bitcoin (BTC) is approaching $40,000 this week as “Dogefather” Elon Musk inflicts agony on hodlers — what’s next?
Following a traumatic weekend for many crypto enthusiasts, Monday is laying the groundwork for the next chapter of the volatile 2021 bull market.
The following are five variables that may influence what Bitcoin and altcoins do next.
Musk tweet hits key Bitcoin technical level
This week, it’s all about one man: Elon Musk. In typical Tesla and SpaceX fashion, the CEO of Tesla and SpaceX sparked outrage on Twitter by declaring himself bearish on Bitcoin.
BTC/USD fell automatically on reports that Tesla was ceasing BTC payments for its goods, but this was insufficient for Musk.
Additional tweets over the weekend, including criticism of Bitcoin’s decentralisation and how he “believes in crypto,” fueled the flames.
It was a suggestion that Tesla might be preparing to divest its shares that caused the most consternation. Bitcoin plummeted to near $42,000, retesting its previous all-time high before levelling off as Musk stressed that no sale had taken place.
“To clarify speculation, Tesla has not sold any Bitcoin,” he wrote on Monday.
With Musk vs. the blockchain world escalating into a full-fledged conflict, Bitcoin is predictably unpredictable while all eyes stay on the Twitter battleground.
Bitcoin was trading at $44,800 at the time of publishing, down 8.7 percent in the previous 24 hours.
As analyst Alex Krueger noted, however, the clarifitication tweet may be unwittingly acting as a local bottom signal, as Musk posted it just as BTC/USD hit a key 61.8 Fibonacci retracement level.
“Elon Musk must be an outstanding technical analyst,” he commented.
“His ‘Tesla has not sold any Bitcoin’ tweet was posted exactly at Bitcoin’s key technical level, the 61.8 fib ($42,845).”
BTC dominance falls below 40%
Musk’s activities have had a detrimental impact on Bitcoin and altcoins alike.
Despite continued praise for Dogecoin (DOGE), the meme-based cryptocurrency struggled to stop losses over the weekend, with the bulk of large-cap altcoins falling in tandem with Bitcoin.
There were some less major setbacks, such as Cardano (ADA), which was still defying the broader downtrend on Saturday, also posting fresh all-time highs.
In terms of bearishness, nothing demonstrates how much the ordinary Bitcoin holder is struggling like market domination.
For the first time since June 2018, Bitcoin’s total market cap share fell below 40% on Monday.
Already on its way out, domination has taken a big hit as a result of recent Bitcoin market pressure, whereas alts such as Ether (ETH) also benefited.
“The Bitcoin dominance is still falling,” popular Twitter trader The Moon summarized over the weekend.
“The alt season is not over yet. But my gut feeling is that the end is near!”
Bitcoin fundamentals provide calm
Despite the tense market activity, nothing gives a bullish counterpoint to the latest Bitcoin paradigm like its network dynamics.
Also after its $42,000 drop, Bitcoin is more appealing to miners than ever, and its network stability is thus stronger than ever.
As previously noted, both hash rate and complexity have mounted miraculous recoveries in recent weeks, reclaiming all-time highs after a miner washout that sparked its own brief market collapse.
The weekend was no exception, with the weekly average hash rate surpassing 180 exahashes per second (EH/s) for the first time.
Difficulty is also on target to rise by more than 10% at the next automatic readjustment in 11 days. The previous change, on May 14, was the biggest positive move since June 2014, at 21.5 percent.
“Bitcoin’s mining difficulty hitting an all-time high just after tesla’s announcement is a chef’s kiss,” Alex Thorn, head of firmwide research at crypto merchant bank Galaxy Digital, said last week.
Dollar bounces at support
Taking a break from crypto-specific causes, the larger macro picture can still have some market trajectory motivation.
After plummeting late last week, the US dollar is regaining momentum. The US dollar currency index (DXY) is jumping off familiar help — spikes in its strength appear to give BTC/USD teething problems.
At the same time, stocks are bullish in China but performing averagely in Europe and the U.S. Coronavirus, with localized peaks in some jurisdictions but fewer cases in others, joins the melting pot.
Among traders, however, it is inflation that is a key issue. A broad global rebound from the time of lockdowns and other restrictions creates problems for those attempting to engineer it — specifically, the U.S. Federal Reserve and other central banks.
“The global economic recovery is well under way; that’s what’s fueling the inflation fears,” Olivier d’Assier, Qontigo head of APAC applied research, told Bloomberg.
After stock markets’ rip roaring year, he added, appetite for profit taking will be understandably increasing.
Bitcoin still beats its last bull market
Is it 2013 or 2017 in terms of the Bitcoin bull market?
There is no indication of bearishness among the industry’s most well-known brands — all that remains is to examine the essence of the present retracement and compare it to previous retracements.
This week, stock-to-flow maker PlanB states that, after all of Musk’s drama, Bitcoin is already outperforming its 2017 run to $20,000. This is amid the fact that the $42,000 drop is technically Bitcoin’s largest this bull run and since the March 2020 cross-asset plunge.
“Today feels like 2017 bull market (esp. during the fork war),” he tweeted on Monday, invoking memories of the birth of Bitcoin Cash (BCH).
“It’s not a straight line to the next ATH, but a lot of volatility (multiple -30% dips). HODL.”
Calming down and zooming out is a crucial attribute shared by experienced Bitcoiners. Stock-to-flow remains unaffected by Musk or some other episode of downward instability, as mentioned last week.
An accompanying survey meanwhile revealed that a majority of 35,000 respondents believe that BTC/USD will still hit $100,000 this year.