What the Heck is Happening to the Bitcoin Market?

pUsually we save our Bitcoin analysis for later in the newsletter but this week the story needs to be front and center What is happening to Bitcoin and have we really reached the end of the bull market In order to shed some light on the causes of this major selloff we have listed a few major explanations for the crashppChina Cracks down on Bitcoin Mining and Crypto BankingnbspThe National Internet Finance Association of China the China Banking Association and the Payment and Clearing Association of China published anbspa hrefhttpswwwcoindeskcombeijingscryptocrackdownisnotnewbutdontdismissit targetblanknoticenbspasaying member financial institutions should not provide services to cryptorelated transactions or investment funds While heavy crypto regulation is nothing new to the Chinese market this message was much more explicit than the warnings issued in and nbspDays later news broke of a new crackdown on coalpowered Bitcoin mining in an effortnbsptonbspmake good on thenbspgovernmentrsquos commitment to meet its clean energy and emission goalsnbspCurrently of the mining power on the Bitcoin network comes from China much of which is powered by dirty energy sources in MongolianbspIf a full crackdown on banking services and mining does take effect in China it could be a devastating blow to the hash power on the network as well as access to the crypto market for their citizens It should be noted that this ban does not prohibit citizens from owning Bitcoin however it does target banking institutions and private bitcoin miners with the hope of making it extremely difficult for Chinese citizens to get access to the crypto marketsppEnergy Consumption FUDnbspThenbspa hrefhttpswwwcoindeskcomfrustratingmaddeningallconsumingbitcoinenergydebate targetblankenergy usage debateanbsphas long been an Achilles Heal for Bitcoiners While this debate has been addressed time and time again each bull market brings in many newcoiners and it can be difficult to distinguish between truth and fiction The energy consumption narrative was exacerbated by Elon Musk when he made the announcement that Tesla would no longer accept Bitcoin as a form of payment citing ESG concerns This caused a cascade of selling from ESG investors and institutionsppnbspppExcessive LeveragenbspWhile leverage did not cause the drop it did do a lot to accelerate the speed and depth of the decline Because traders were so leveraged long on the crypto market a small pullback was enough to liquidate highly levered positions In fact overnbspa hrefhttpsfinanceyahoocomnewsovercryptotradershtml targetblank positionsanbspwere liquidated aka completely lost in a hour span from May th to th Leverage is present in all markets but perhaps most prevalent in crypto You would be hardpressed to find another market that offers such ridiculous amounts of leverage up to x as in crypto In order for this market to take the next step as a global asset class this leverage epidemic needs to be addressedppnbspppMarket StructurenbspIt comes as no surprise to anyone that the crypto markets have been overheated With the price of Bitcoin rising over in a month span a pullback was almost inevitable Moreover given that the new Bitcoin highs were gettingnbspa hrefhttpswwwtradingviewcomxazDu targetblankshorter and closer togethera signaled that the parabolic move was losing steam Once Bitcoin was unable to print a higher high on May th the market lost faith in the upward momentum and the selloff beganppnbspppstrongSo is the Bull Market OverstrongppAlthough it is impossible to say with certainty we are extremely confident that the bull run will continue this year Similar to the rally this bull run looks destine to have two major legs We look at this dip as a golden buying opportunity before the next leg up The general feeling of those in the industry is that these losses will be recovered in short orderp