What are the main factors behind today’s 10% decrease in the price of Bitcoin (BTC)?
Bitcoin took investors on a wild ride in the market on Tuesday, starting with a new all-time high of $69,324 before experiencing a significant drop. This rollercoaster journey has raised questions about the dynamics of the market, investor behavior, and the impact of external factors on the cryptocurrency landscape.
Bitcoin’s price surge, which has been fueled by market inflows since the approval of Bitcoin ETFs in January, propelled it past its previous all-time high in November 2021. The remarkable rally of Bitcoin in 2024, with an increase of approximately 63%, has been attributed to the strong demand for new U.S. ETFs and the anticipation of a slowdown in the token’s supply growth. The approval of spot ETFs from major investment firms like BlackRock Inc. and Fidelity Investments has resulted in nearly $8 billion in net inflows in less than two months.
The approval of BlackRock’s ETF (IBIT) in January 2024, which quickly accumulated over $10 billion in assets, aligns with Bitcoin’s doubling in value since the filing. Bitcoin surpassed its previous all-time high of $69K and reached $69,324 before plunging 12% to just above $60,000 in a span of five hours. As of now, the current price of Bitcoin hovers around $63,836.
Market analysts had already anticipated this level of volatility, considering Bitcoin’s historical price movements during previous bull markets. Alex Thorn, Head of Research at Galaxy, commented, “This is likely the beginning of a lot of volatility as we go up,” emphasizing that bull markets often involve significant corrections. Thorn referred to the 2017 market, where there were multiple corrections of 25% or more on the way to the previous all-time high of $20,000. He further emphasized the importance of understanding that bull markets are not linear and pointed to similar price fluctuations during the COVID-19 pandemic in 2020-2021. He suggested that some consolidation might be healthy after the substantial year-to-date gains.
The surge in Bitcoin’s price to record levels has led to a significant number of traders taking profits. Zaheer Ebtikar, founder of crypto fund Split Capital, noted, “Given that almost everyone who has ever bought Bitcoin has now made a profit, there is a good chance that we will see some profit-taking.”
Prominent Bitcoin trader, Hsaka, weighed in on the situation, stating, “Bitcoin is NOT naturally going down. It is being pushed down via whales placing spoofy sell orders on exchanges to make noobs and risk managers sell to ‘buy back lower.'”
Bitcoin’s recovery from the lows of 2022 has transformed the industry, with the total market value reaching approximately $2.6 trillion. Despite skepticism from traditional finance personalities like Jamie Dimon and Charlie Munger, Bitcoin continues to attract attention from major financial institutions.