After the bloodbath in the crypto market on May 19, will Bitcoin turn bearish or enter a bull market?

For veteran cryptocurrency players, these four historic crashes are still fresh in their memory.

On December 3, 2013, the People's Bank of China and five other ministries jointly issued a "Notice on Preventing Bitcoin Risks", requiring all financial institutions and payment institutions not to conduct Bitcoin-related businesses, and pointed out the risks of encrypted assets such as Bitcoin. Subsequently, the Bitcoin market began to gradually turn bearish.

On September 4, 2017, the People’s Bank of China and seven other ministries jointly issued an “Announcement on Preventing Risks of Token Issuance and Financing” with the aim of cracking down on the ICO token issuance activities that were beginning to prevail at the time. Within 10 days of the announcement, Bitcoin fell from US$4,900 to a low of US$3,387, while the vast majority of ICO tokens were “cut in half” or even “cut at the bottom”. Just after most people fell into despair, encrypted assets such as Bitcoin experienced a rapid rebound and eventually ushered in the crazy stage of the bull market.

On March 12, 2020, affected by the global economic uncertainty caused by the panic caused by the epidemic, Bitcoin began to fall from US$7,300 and plunged to US$3,800 on March 13, a 24-hour drop of more than 50%. Subsequently, Bitcoin and other crypto assets ushered in a year-long slow bull market.

On May 19, 2021, after Tesla founder Elon Musk tweeted accusing Bitcoin of energy consumption issues, causing a plunge in Bitcoin and other crypto assets, the People's Bank of China and the three major financial industry associations jointly voiced their opposition to virtual currency speculation, and once again emphasized the contents of the "Notice on Preventing Bitcoin Risks" and the "Announcement on Preventing Token Issuance and Financing Risks", which caused further panic in the already chaotic crypto asset market.

In the past week, Bitcoin fell from a high of $58,000 to a low of $31,000, a drop of 47%, while ETH fell from $4,100 to a low of $1,900, a drop of 53.7%. Other altcoins suffered a terrible loss.

Among these four major crashes, three were related to China's regulatory trends, but the market's reactions afterwards were different. It can be seen that regulation is not the direct cause of the market bear market, but only plays a short-term inhibitory role.

Looking back at past data, we found that the market ushered in a bear market after the first regulatory movement, and ushered in a violent bull market after the second one. What will the situation be like in the latest one?

Before trying to answer this question, let's first understand what happened during this crash.

Short-term holders cut their losses, triggering a decline, and long leverage liquidation caused the market to plummet

According to the on-chain data provided by glassnode, the SOPR indicator has fallen below 0.9 today, indicating that a large number of short-term coin holders have chosen to cut their losses. After the market fell due to the panic selling of short-term coin holders, a large amount of long leverage in the market (including centralized exchanges and DeFi leverage) was liquidated, further pushing down the coin price.

And last night, it was rumored that Justin Sun’s 600,000 ETH in the defi mining pool was almost liquidated. According to Shenyu, if these ETH were liquidated, it might cause ETH to fall to three digits.

The severity of the cryptocurrency world this time may have exceeded that of 312.

According to the Fear and Greed Index, the current market has fallen into a stage of extreme panic, and the index value of 11 has reached the lowest value since March 2020, indicating that market sentiment may have reached its peak.

Will the panic of short-term holders lead to an early end to the bull market? The possibility is not high

Looking back at the past crypto markets, we can see that the market always turns from bull to bear when long-term coin holders sell in large quantities. This time, the crash was caused by short-term coin holders selling, while long-term coin holders chose to buy.

Interestingly, as the market panicked last night, Tesla founder Elon Musk tweeted that the company has a pair of diamond hands (implying that it will firmly hold Bitcoin).

Can a random punch kill a master? This time I don't believe it.