Factors Leading to the Decline in Bitcoin Price
Bitcoin recently unexpectedly fell below $39,000, attracting attention from the crypto community. Market enthusiasts were optimistic about the bull market after the approval of the Bitcoin spot ETF by the U.S. Securities and Exchange Commission (SEC), but the sharp drop in the price of Bitcoin (BTC) seems to be different.
Analysts have identified five potential triggering factors for the unexpected sell-off. Let's take a look at the fundamental factors that have recently led to the decline in the price of Bitcoin. Despite various factors affecting the sentiment of the crypto market, the following are the five main reasons for the recent decline in Bitcoin price:
FTX Sell-off
A major blow to the crypto market came from FTX liquidating all 22 million shares of Grayscale Bitcoin Trust (GBTC) in bankruptcy proceedings. FTX, currently bankrupt, sold all GBTC shares to meet its borrowing obligations. This move is crucial for FTX's financial restructuring and has cast a shadow over the market's stability.
ETF Approval and Volatility
The approval of the spot ETF by the SEC sparked optimism among crypto market enthusiasts, but this positive momentum was short-lived. Meanwhile, in terms of the approval of Bitcoin ETF, key participants in the crypto space, such as BlackRock, have been criticized for their role in suppressing the market, compared to competitors.
The massive outflow from Grayscale's GBTC recorded a total outflow of $3.4 billion on the seventh trading day, with an outflow of $640.5 million on the seventh trading day, and a large amount of Bitcoin transferred to various exchanges, increasing market pressure. Critics, including Bitcoin advocate Nic Carter, referred to Grayscale's GBTC as a "giant wrecking ball of destruction."
Investors Seeking Profit Opportunities
In anticipation of a price rebound after the approval of the Bitcoin spot ETF, some investors sought profit opportunities. Encouraged by the optimism surrounding the ETF and the upcoming halving event in 2023, investors focused on short-term profits. However, market experts continue to remain optimistic about the potential for ETF to attract massive inflows in the future, believing that this may drive Bitcoin to new all-time highs.
Regulatory Concerns
The SEC's positive stance on crypto players such as Coinbase, Binance, Ripple, and the negative opinions from Senator Elizabeth Warren and SEC Chairman Gary Gensler have raised uncertainty. Discussions on comprehensive regulation by the EU, South Korea, and other major participants have helped investors seek clarity before committing to the crypto industry.
Pause Before Economic Data
With the release of key economic data such as the U.S. fourth-quarter GDP and PCE inflation data this week, investors are preparing for potential market impacts. In addition, important indicators such as the Consumer Price Index (CPI) scheduled to be released next week are expected to provide insights into the health of the U.S. economy. Although the Fed is expected to announce three rate cuts in 2024, going against the expected three rate cuts this year could lead to further sell-offs in the crypto market.
Analysts' Warnings on Bitcoin Price
Bitcoin's recent decline has revealed the complex interactions between various factors, from FTX restructuring to regulatory uncertainty and profit strategies. As the crypto community grapples with these challenges, the future remains uncertain. However, market participants maintain hope for potential changes that may reshape the crypto narrative in the coming days. Nevertheless, a recent statement by renowned crypto analyst Ali Martinez has added further pressure to the sentiment.
In his recent post, Ali Martinez warned that Bitcoin could drop to $32,700, citing historical retracement patterns. Specifically, Martinez emphasized that Bitcoin has reached the 78.6% Fibonacci level of its recent uptrend and is correlated with previous cycles, indicating the possibility of a 50% Fibonacci retracement.
According to his analysis, if history repeats itself, BTC could experience a significant decline, urging investors to closely monitor the $32,700 level. This analysis serves as a warning for the volatile crypto market, advising stakeholders to remain vigilant about potential price adjustments. Meanwhile, at the time of writing this article, the price of Bitcoin is $38,910, down 4.17% in the past 24 hours. However, during the same period, the trading volume increased by 83% to $31.04 billion.
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