Can Bitcoin, Ethereum and other cryptos recover?

Nearly US$1 trillion was wiped off the market capitalisation of the cryptocurrency market this week. Here's what analysts have to say about it.

  • Bitcoin (USD) price hit a four-month low of US$30,066 on Wednesday (20 May 2021)
  • Meanwhile, Ethereum (USD) and other cryptos tanked over 50% in a market-wide rout
  • A tweet from Tesla CEO Elon Musk managed to slow down the bleeding
  • Analysts are split on crypto’s recovery outlook, with one saying this is ‘just yet another hurdle for Bitcoin to overcome’
  • Buy and sell Bitcoin, Ethereum and more cryptocurrencies with an IG account

Cryptocurrency market plunges nearly US$1 trillion

Bitcoin, the biggest and best-known cryptocurrency, slid to a low of US$30,066 on Wednesday (20 May 2021). The coin was trading 7.2% lower at US$38,286 as of 10:35SGT on Thursday, and has fallen about 41% from its record high of US$64,895 reached on 14 April 2021.

Meanwhile, Ethereum - the second largest digital currency by market cap - sunk nearly 60% from its highest point this year to a one-month low of US$2,271.

Other cryptos - from Litecoin to the parody invention Dogecoin - also suffered massive losses of over 50%.

At one point on Wednesday, almost US$1 trillion was wiped off the market capitalisation of the entire cryptocurrency sector, Reuters reported. Plumb Balanced Fund portfolio manager Tom Plumb noted: ‘It’s not just a small segment of the world that is affected by cryptocurrencies; it’s now mainstream.’

Also weighing on sentiment was China’s move on Tuesday to ban financial and payment institutions from providing cryptocurrency services, and also the country’s warning to investors against speculative crypto trading.

Some market watchers predicted more losses ahead, noting that Bitcoin’s fall below US$40,000 was a breach of a key technical barrier, Reuters reported.

During the crypto price slide on Wednesday, Tesla Inc CEO Elon Musk tweeted an emoji, suggesting the Bitcoin position is worth holding on to. Musk’s tweet ‘definitely’ helped the digital token’s recovery, said Toroso Investments chief investment officer Mike Venuto.

Last week, cryptocurrency price declines erupted after Musk’s comments on Twitter that the electric-car maker has suspended vehicle purchases using BTC.

To hold on or to let go?

‘The crypto markets are currently processing a cascade of news that fuel the bear case for price development,’ said Ulrik Lykke, executive director at crypto hedge fund ARK36.

Over US$250 billion was erased from Bitcoin’s market cap in the past week alone. Although that figure seems ‘astronomical,’ Lykke said that this is not an uncommon phenomenon in the crypto market.

And in terms of Bitcoin’s outlook, Lykke said that though ‘things may be looking grim right now’, this is ‘just yet another hurdle for Bitcoin to overcome and a small one compared to what it has braved in the past’.

On the other hand, UBS Global Wealth Management’s chief investment officer Mark Haefele noted that the ‘ high volatility of cryptos...makes them an unreliable store of value’.

‘Weekly moves of more than 10% in Bitcoin are common. In the week to 14 May, bitcoin fell 24%, which would be a high level of volatility for a small-cap stock, let alone a currency,’ Haefele wrote.

Trade BTC, ETH and other cryptocurrencies with IG

Create an IG account or log in to your existing account to get started now.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Cryptocurrency trading

Trade CFDs on cryptocurrencies with IG.

  • No need to own any cryptocurrency
  • Trade on bitcoin, ether, litecoin, EOS, NEO and Stellar pairs
  • Trade on markets that are both rising and falling

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.