Why is Bitcoin dropping to $44k, and what’s next?
Why is Bitcoin dropping to $44k, and what’s next?

Why is Bitcoin dropping to $44k, and what’s next?

By R.L. Bryer - 17 May 2021

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Why is the Bitcoin (BTC) price dropping? The daily high on Sunday was $49,826 and the price had been hovering around $47,000 for the majority of the day before dropping to a low of $43,825. 

BTC began to rally heading into its close and pushed back above $46,200 with 100 minutes left before candle close.

With only minutes left on the daily / weekly candle BTC rallied but still closed in the red at $46,399. 

Why is Bitcoin dropping: the bullish case

The bullish case for Bitcoin is the empirical data on the asset. Long time Bitcoin holders have been through many of these pullbacks and know that Bitcoin is highly predictable because it’s based almost entirely on mathematics. 

These drawbacks during bull cycles are nothing new for long term Bitcoin holders that have seen these time and time again. The likelihood is that the vast majority of sellers are new retail investors being washed out at these price levels – they’re likely giving up their recently acquired positions to institutions that want to pack their bags for what many believe will be a parabolic moonshot later in 2021.

At the time of writing, BTC is back above the 21 week moving average and trying to hold $45k [$45,0167].

Metcalfe’s Law

Historically, over Bitcoin’s twelve year history the number of users on the network doubles annually. This current rate puts Bitcoin on track to crack 1 billion users in the next 4 years. 

Metcalfe’s law states the value of a telecommunications network is proportional to the square of the number of connected users to the network. 

When applied to Bitcoin, long term oriented individuals love the future prospect of the network as a safehaven to store value.  If the network continues to double its rate of users every 12 months while also reducing the monetary issuance every 4 years by half, the sell pressure continues to decrease while the demand continues to increase exponentially. 

Bitcoin bulls are still stacking sats 

Michael Saylor, the CEO and Founder of MicroStrategy added another $15 million BTC purchase this week.

Saylor has been very outspoken about his BTC purchases, the future of central bank currencies and the already surging inflation that he believes will only increase in the future. 

Bitcoin and the Bearish Case

Bears currently have momentum and have been able to push the price down more than $20k after Bitcoin made its all-time high of $64,804.72 on April 14th.

With strong support at $43k, bears will try to push the price below this support level. A candle close on a significant time scale could send BTC below $43k and could trigger a move down to its next support zone of $36k. 

Tradingview’s Technicals Meter still has Bitcoin at moderate sell levels. The asset was highly oversold on the RSI after dipping to $43k on Sunday, so a retest of this region in the coming days could occur but will be a major battleground between bulls and bears.

The Macro outlook 

The aggregate crypto market cap has also pulled back during Bitcoin’s downtrend. After peaking at $2.61 trillion on May 11th the total cap has fallen more than 500 billion dollars and is barely holding $2 trillion as support. 

R.L. Bryer

Since 2009, the onset of the bitcoin network, R.L. Bryer has been covering the space. He is the author of Blockchain: Project Renaissance Volume I and II. He's also been the guest of countless bitcoin and cryptocurrency related podcasts throughout the world. Every opportunity, he speaks on or writes about Austrian Economics and how bitcoin is the world's preeminent money.

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