Bitcoin news live: Price flash crash triggers market-wide chaos

One reason for El Salvador’s president, Nayib Bukele, to “buy the dip” today is because he sees the long-term potential of the cryptocurrency in countries such as his.

Just two weeks after El Salvador officially introduced the Bitcoin Law, which officially made the cryptocurrency legal tender, more than 1.1 million people are already using it as a day-to-day currency. That’s roughly one sixth of the country’s population that didn’t previously have access to traditional financial services.

“It seems that we will be able to bank more people in one month, than they did with nationalisations and privatisations of traditional banks in 40 years,” President Bukele said.

It prompted another staunch believer in bitcoin, MicroStrategy CEO Michael Saylor, to praise bitcoin and the stance El Salvador has taken. As the largest corporate investor in bitcoin, with billions on its balance sheet, it wouldn’t be surprising to learn that Saylor is also buying the dip.

Many long-term bitcoin holders are using today’s price crash to push the “buy the dip” narrative in the hope that it will bounce back stronger.

Bitcoin podcaster Cedric Youngelman even goes as far as describing it as “the greatest buy zone in history”.

Other traders are offering a more cautious view on the market, with bitcoin author Glen Goodman describing it as “choppy hell” that is too risky to call either way.

“This is why most of my money remains on the sidelines, waiting for better opportunities,” he says.

The price of bitcoin appears to have stabilised at around $44,000 following the series of flash crashes earlier in the day that saw it drop from above $48,000.

Other leading cryptocurrencies also seem to have levelled out, with Ethereum (ether) just holding above the $3,000 mark and dogecoin managing to keep above $0.20.

Which way it goes from here depends on who you ask, with many bitcoin maximalists backing up Salvadoran President Nayib Bukele by claiming that now is a great time to “buy the dip” in anticipation of future price gains.

One thing that has been interesting about major bitcoin price crashes in 2021: each low has still been way above any previous high seen in 2020 or earlier.

One reason for the lows being not as low as those in the past is that bitcoin is now bolstered by massive institutional investment. New research from Fidelity Digital Assets has found that 52 per cent of institutional investors now hold bitcoin or other cryptocurrencies

We’ve heard from Simon Peters, a market analyst at the online trading platform eToro, who explains what this means for the overall crypto space.

The counter argument to the ‘dead cat bounce’ theory from the last post is that this bitcoin price crash is just a blip amid a record-breaking bull run.

Similar dips were seen in 2013 and 2017 in the run up to new all-time highs, and some analysts have pointed to “consistent” market patterns this time around.

Bullish analysts believe the peak of this current cycle is above $100,000 – way above the $64,000 price record seen earlier this year – and that it will be hit before the end of 2021.

Currently at around $44,000, bitcoin has a lot of climbing to do if it’s to achieve that.

The latest price crash has divided bitcoin analysts over whether this is the beginning of a longer-term downward trend, or just a blip on the way to new all-time highs.

According to the pseudonymous Mr Whale, who has racked up more than a quarter of a million Twitter followers with his largely pessimistic predictions, the recent price gains were part of a “dead cat bounce” price pattern.

This is where the price rebounds during a bear market, before continuing to plummet. Mr Whale shared this image today to illustrate the phenomenon, though there has been plenty of pushback from crypto advocates dismissing this take.

Mr Whale puts bitcoin on a path to reach below $10,000 within the next year, though it should be noted that he had bearish forecasts all throughout the 2020/21 bull market.

Bitcoin price crashes typically prompt one of two extreme reactions from traders and investors.

The first is to panic sell, which is usually the response of short-term holders and those new to the market. This forces the price down even further and induces more fear among other so-called ‘paper hands’, who also sell.

The second reaction is to use the price drop as an opportunity to acquire more bitcoin at a cheaper price. These so-called ‘diamond hands’ are often long-term holders who are familiar with its wild fluctuations but are bullish about its longer-term trajectory.

El Salvador’s president has proved himself to be in the latter camp, despite only recently buying bitcoin for the first time. Nayib Bukele revealed that he has “bought the dip” with a $6.7 million investment into the cryptocurrency.

You can read the full story here.

Dogecoin founder Billy Markus has responded to the market-wide price crash by sharing a gif of the “This is fine” dog.

The meme-inspired cryptocurrency has seen some of the heaviest losses on Monday, falling by nearly 15 per cent and showing no signs of slowing down.

Having traded above $0.25 over the weekend, dogecoin is now threatening to fall below $0.20 for the first time since May. Despite these losses, the cryptocurrency is still up nearly 10,000 per cent since this time last year.

It’s not much consolation for Markus, who sold his original holdings years ago and only bought back in earlier this year (though still when dogecoin was below $0.20).

Bitcoin has suffered a series of mini flash crashes on Monday morning, pushing the price below $45,000.

Having traded close to $49,000 over the weekend, the cryptocurrency is now back at the levels it was at exactly one week ago.

The price fall has prompted a market-wide dip with other leading cryptos falling by between 5-15 per cent at the start of the week.

Of the top 10 leading cryptocurrencies, Solana (SOL) has been the hardest hit. The altcoin fell by more than 13 per cent over the last 24 hours, pushing its market cap down to $41 billion – $15 billion down from its peak earlier this month.