The cryptocurrency market has witnessed a tremendous inflow of cash pour into the market in a single day, totaling $198.91 billion.
Bitcoin has recovered slightly on Wednesday following a series of price drops over the previous several days that sent the cryptocurrency to its lowest point in 2021. The digital asset is currently back above $34,000 rallying by more than 10% and looks to be heading upwards after briefly falling below $29,000 on Tuesday.
Coinmarketcap shows that the global crypto market cap is up by almost 8% in a day.
Despite a sharp fall that sent bitcoin to lows not seen in 2021, the digital asset has recovered far beyond $30,000 and is now trading higher than it was yesterday.
This surge has been mirrored by Ethereum (ETH), Cardano (ADA), Dogecoin (DOGE), and other prominent cryptocurrencies.
Analysts are split
Due to the rebound, crypto experts are divided on whether the losses are part of a larger bear market or merely a price correction in the middle of a bull run that will propel bitcoin to new record highs later this year.
Major investors tend to believe the latter, with MicroStrategy investing another $500 million in bitcoin earlier this week. While Dogecoin’s creator Billy Markus also stated that he had invested in the cryptocurrency for the first time in eight years.
As reflected in the image below, five of the top gainers among the top 100 cryptocurrencies by market capitalization are Livepeer 37%, Celo 26%, Solana 22%, Chilliz 18%, and Dogecoin 14%, implying that NFT, DeFi, and meme coins are where traders see the biggest gains to be made in the current market environment.
The market has experienced a significant drop in recent weeks, owing primarily to the decreasing price of Bitcoin, which has traditionally influenced the rest of the market.
The fall began due to Elon Musk’s concerns about Bitcoin’s carbon footprint, as the Tesla CEO revealed his reservations about the massive energy consumption necessary to mine BTC.
In addition to Musk suspending Tesla purchases using the crypto-asset, we have seen more FUD despite the fact that the SEC has no plans to regulate crypto in 2021. Moreover, China recently banned Bitcoin mining in three of the country’s major mining locations.
Despite the recent influx of funds, some analysts think this could be a short-term uplift, and more volatility is anticipated further down the road.
Analyst predicts lengthy recovery
“Bitcoin has been under a lot of pressure since May, everyone was expecting it to have a V shape recovery, but the chart looks pretty bearish still; it’s trying to find support here because, in January, this was the level where bitcoin traded sideways for a month. There is a lot of volume around this 30K mark. If it does not hold, we are going all the way down to 16,000, potentially right back down to 11,000, which could completely unwind the mega rally the market has been on this last year.”
According to Vermeulen:
“It’s going to take a while for this damage to be resolved on the chart, and eventually it will start another rally and potentially go up and hit 100k, but I do not think it could happen anytime soon; it could be a year plus.”
Significant corrections frequently follow any large moves in either way in the crypto market, so this is not unexpected. However, despite having broken above the $30,000 resistance level, it appears traders are proceeding with caution.