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Is the Bitcoin Bull Market Over?

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Bitcoin was hit with major turbulence in the middle of April. A blackout in China knocked the top digital currency from its perch just after it had climbed above a record US$62,000 price. The price of Bitcoin fell below US$50,000 over the weekend. Is the Bitcoin and broader crypto bull market well and truly over? Or is this just another blip in Bitcoin’s meteoric rise?

Why Bitcoin has been throttled in April

Crypto liquidations soared past $10 billion in the latter half of April after major power blackouts in China. This was not the only factor that has impacted Bitcoin and its peers. Rumours are swirling around the potential for a crackdown on digital currencies coming in the months ahead.

Power blackouts in China’s Xinjiang province led to a 50% decline in Bitcoin’s hash rate. Crypto’s market capitalization fell by $310 billion from a peak of $2.2 trillion in the wake of the blackouts. The crypto market had encountered volatility even before the issues in China. Rumours had emerged that the United States Treasury aimed to crack down on financial institutions for money laundering via crypto. However, this has failed to materialize.

The blackout issue was resolved before the end of the April 17-18 weekend. Moreover, crypto industry experts have dismissed the crackdown rumours. Regardless, Bitcoin has failed to recoup its losses as we approach the end of April.

Can crypto rebound in the spring?

Bitcoin and the crypto market were riding high before the blackouts and rumours of a crackdown. Coinbase, the top global crypto exchange, debuted on the NASDAQ in the middle of April and drew huge interest on its opening trading day. The threats of a crackdown have stirred unease in investors, but this may be unwarranted. Bitcoin has enjoyed significant support from top payment processing platforms like PayPal, big banks like Morgan Stanley, and brokerages like WealthSimple. Recent reports indicate that JPMorgan also plans to launch a Bitcoin fund.

In February, Canada launched the very first Bitcoin-focused exchange-traded fund (ETF) on the TSX. Purpose Bitcoin ETF (TSX:BTCC.B) has dropped 1.4% since its debut. Investors who bet on the ETF early have not been rewarded in the near term. However, its launch was another milestone for the top digital currency. Crypto bulls should be enthusiastic about the wins the market has chalked up over the past year.

Should investors buy the dip in Bitcoin?

It is difficult to apply conventional investing wisdom in the crypto market. What we can observe is that crypto has seemed to benefit in a big way from the abundance of liquidity over the past year. Each time Bitcoin has faltered, it has stormed back to achieve record highs. Rumours of a crackdown aside, Bitcoin and its peers have benefited from mainstream approval in recent months. The attention of regulators may give its libertarian early adopters a scare, but I predict that future moves will grant Bitcoin more legitimacy rather than less.

I’m not eager to jump into this volatile market, but I’m also not comfortable calling Bitcoin’s top right now.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends PayPal Holdings and recommends the following options: long January 2022 $75 calls on PayPal Holdings.

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