Bitcoin price drops below $34,000, pulling altcoins to multi-month lows

On May 21 the crypto market was hit with a fresh round of fear, uncertainty and doubt (FUD) which sparked another, albeit more muted, sell-off in Bitcoin (BTC) price and a majority of the altcoins. 

For the second time in less than 3-weeks, China was again the culprit as rumors that regulators were looking to crack down on Bitcoin mining and trading. Media also reported that authorities in Hong Kong proposed banning retail traders from cryptocurrency trading.

Data from Cointelegraph Markets Pro and TradingView shows that Bitcoin (BTC) bulls were holding the $40,000 support level prior to the announcement from China but quickly lost it and had to regroup at the $36,000 support before further downside ensued.

While the turnaround seen across the market on Thursday helped assuage fears of the return to a crypto winter, some analysts, including Jarvis Labs co-founder Ben Lilly, correctly assessed that “we are not out of the woods” prior to Friday’s drawdown. 

Still, there is room for hope that the price of BTC could manage to hold its ground and climb higher as activity seen in whale wallets showed heavy inflows at $39,931, indicating a new possible level of support. 

Significant inflows to whale wallet happened at $39,931 (around 115k BTC). This should now be a support for #Bitcoin. Closest resistances are at 52 and 56k. pic.twitter.com/XnsNQ35BFZ

— whalemap (@whale_map) May 21, 2021

Exchange activity spikes during sell-off

Cryptocurrency exchanges played a big part in Wednesday’s price action as highlighted in the recent Delphi Daily report by Ashwath Balakrishnan. 

According to Balakrishnan, Binance was responsible for:

“Facilitating nearly $100 billion worth of spot trades” and decentralized exchanges on the Ethereum (ETH) network “recording over $10 billion in volume.”

This marked the “single highest day of volume for all DEXes” on record led by Uniswap (UNI) which saw “nearly $6 billion of volume” transacted as retail traders ran for the exits.

According to Micah Spruill, managing partner and chief investment officer at S2F Capital, approximately $9 billion in value was liquidated during this week’s correction in a similar washout to what was experienced in March 2020.

Spruill also pointed to the “historic levels of Bitcoin being moved off the exchange on May 19 when compared to the net exchange outflows over the last several years,” highlighting the fact that this was the highest dollar denominated amount of net outflows in history and is “extremely bullish.”

To get a better grasp on the current sentiment of traders in the market, Spruill pointed out that retail wallets have continued to grow in numbers despite the market turmoil with the dip being quickly bought by retail investors, which is “a sign of continued growth and adoption.”

Spruill said:

"The number of new entities has been increasing this entire pullback as well, further pointing to the fact we have not experienced a bull cycle top but rather a local top within a large bull cycle."

Altcoins crushed, again 

The continued pressure on Bitcoin spilled over into the altcoin market causing the majority of tokens in the top 100 to drop deeper into the red.

The overall cryptocurrency market cap now stands at $1.4 trillion and Bitcoin’s dominance rate is 44.3%.

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