Bitcoin plummeted below the $30,000 mark. What happened?

Bitcoin continued to fall on Thursday (January 21), dropping more than $4,000 from around $35,600 in the morning. On Friday morning, Bitcoin fell below $29,000 per coin, hitting a low of $28,843.3, the first time since January 5, and the intraday decline widened to 6%.

Since starting its unilateral rise in December last year, Bitcoin has soared from below the 20,000 mark to a high of $42,000, but this rise was paused on January 8 this year. Bitcoin began a volatile correction for more than two weeks, during which the daily drop of nearly $4,000 made many bulls unable to bear it.

According to China Fund News, as of 7 a.m. Beijing time on the 22nd, in the past 24 hours, a total of 110,000 people in the entire encrypted digital currency market had their positions liquidated, with the amount of liquidation exceeding US$1 billion, or approximately RMB 6.7 billion.
Regulatory concerns about Bitcoin <br />One of the driving forces behind the cryptocurrency crash is the concern about the government's increased regulation. Recently, U.S. Treasury Secretary nominee Janet Yellen pointed out at a hearing that cryptocurrencies are worrying and are a special focus for terrorists in financing and money laundering. The government will "need to review ways we can restrict their use and ensure that money laundering activities are not carried out through these channels."
In addition, Europe has also released signals that cryptocurrency regulation may be strengthened. On January 11, the UK financial regulator warned investors that there are risks in investing in Bitcoin and other cryptocurrency assets, and those involved should be aware that they may lose all their investments. On January 13, European Central Bank President Lagarde emphasized in a speech that it is necessary to regulate Bitcoin's "high degree of speculation." She accused Bitcoin of facilitating criminal activities, saying that the cryptocurrency makes some "ridiculous businesses" possible:
“For those who thought Bitcoin was going to be money, I’m sorry, it’s just an asset, a highly speculative asset that’s been involved in some ridiculous businesses and some interesting and totally reprehensible money laundering.”
Matt Maley, chief market strategist at Miller Tabak, said Thursday that any regulatory action could cause some of the money that has flowed into Bitcoin in recent months to flow out. He said:
“If the government steps up and wants to increase regulation, I think some of the excess liquidity will move to another area. That could cause a pretty big drop in Bitcoin, although I think it will go higher in the long term.”
In addition, Miley also pointed out that regulation is not the only short-term risk for Bitcoin. After rising more than 200% in the past six months, it may also be time for Bitcoin to pull back. If Bitcoin falls below the low of January 11, which is about $30,300, it may prompt more short-term momentum funds to abandon Bitcoin, exacerbating the decline.
Miley sees $25,000 as a possible bottom, which would mark a nearly 50% correction for Bitcoin from its early January peak. However, he still sees Bitcoin as a long-term bet that will trend higher.
Scott Minerd, chief investment officer of the well-known investment company Guggenheim, has previously announced that Bitcoin will reach $400,000 and invested his funds in it. He now says that Bitcoin may first fall back to $20,000, but he still insists that Bitcoin will one day reach $400,000.
Bitcoin is not a reliable hedge <br />According to a new report Thursday from JPMorgan cross-asset strategists John Normand and Federico Manicardi, Bitcoin is “the least reliable hedge during periods of acute market stress.” While they acknowledge that Bitcoin is indeed a good option for investors who are concerned about policy shocks, the team warns that Bitcoin will not perform like traditional defensive assets in the short term. They added:
“Increasing mainstream ownership of cryptocurrencies is increasing Bitcoin’s correlation with cyclical assets, potentially transforming it from a safe-haven asset to a leverage tool.”
It’s therefore best to view cryptocurrency investing as a way to hedge against the risk of losing confidence in a country’s currency or payment system — rather than as a competitor to assets like gold.
Deutsche Bank's January investor survey showed that Bitcoin is seen as the biggest bubble, followed by US technology stocks. 50% of investors gave Bitcoin a bubble rating of 10 points, the highest value, and the average score was 8.7. Bank of America's January fund manager survey showed that long Bitcoin is the most crowded trade, followed by long technology stocks and shorting the US dollar.
It is important to note that institutional buyers still seem to have not given up when Bitcoin has fallen sharply. According to The Block, two documents received by the U.S. Securities and Exchange Commission show that BlackRock, a trillion-dollar asset management giant, will allocate Bitcoin futures through some of its funds. However, the documents themselves do not explicitly state that BlackRock funds are buying Bitcoin futures, nor do they indicate that BlackRock may buy futures settled in cash or actual Bitcoin. (Jinshi Data)