Was the Elon Sell-off a Price Bottom for Bitcoin?
What can we conclude about bitcoin’s price behavior after this sell-off? Was this similar to other days?
The price of bitcoin dropped 12% on May 12, falling below $50,000, following an announcement by Elon Musk saying that Tesla stopped accepting bitcoin as payment and then saying that he was worried about bitcoin’s use of fossil fuel use.
What can we conclude about bitcoin’s price behavior after this sell-off? Was this similar to other days?
In terms of intraday price movement, it was very similar to bitcoin’s behavior on January 21, when the price dropped 13% mostly on comments from US Treasury Secretary Janet Yellen suggesting stronger regulations. At the time, bitcoin’s price was around $31,000.
Indeed, both of those days are categorized as “reversal days” (cluster #0 or purple dots), as shown in the chart below. Clusters #1 and #3 represent the “bull days” and the “normal days” respectively. You can see an explanation of the model that categorizes price behavior here.
These type of days, when bitcoin is in a bull market, can be and have been associated with market bottoms after price corrections, see the chart below. Of course I need to do the usual disclaimer that this is not financial advise. We’ll see in the next few weeks.