The 6.5% plunge represents the largest single-day decline for Bitcoin in over a month, despite the asset’s overall growth of more than 12% in the past 30 days and an impressive 150% rally since January 1.
In a surprising development experienced earlier today, the price of Bitcoin (BTC) experienced a sudden 6.5% drop, plunging below $41,000 and erasing nearly a week of gains. This unexpected drawdown has left investors puzzled, prompting a chain reaction across the crypto space.
Bitcoin Price Sees Sharp Decline
At 2:15 am UTC, Bitcoin’s value spiraled down from $43,357 to a low of $40,659 within a 20-minute timeframe. Concurrently, the second-largest cryptocurrency by market cap, Ethereum (ETH), also faced a sharp decline, falling over 8.9%.
While both have subsequently recovered slightly with Bitcoin currently trading at $42,058 and Ethereum currently priced at $2,234, down 5.01% on the day, the rapid market instability has echoed through other prominent cryptocurrencies like Binance Coin (BNB), XRP, and Solana (SOL).
The abrupt drop triggered the liquidation of more than $270 million worth of long positions, as reported by CoinGlass. Moreover, Bitcoin alone witnessed a wipeout of $1.2 billion in open interest, which now hovers around $17.9 billion. Notably, this plunge occurred just moments after Scott Melker of Wolf of All Street highlighted Bitcoin’s eighth consecutive green weekly candle, questioning the timing for a correction.
The 6.5% plunge represents the largest single-day decline for Bitcoin in over a month, despite the asset’s overall growth of more than 12% in the past 30 days and an impressive 150% rally since January 1. Last week, optimistic forecasts suggested that Bitcoin might be entering a rally, potentially reaching $50,000 in the coming weeks.
Alistar Milne, a prominent analyst, noted the current bear market as the “worst” Bitcoin has faced under the 200-week Moving Average price. Milne predicts a golden cross forming as the 50-week Moving Average crosses the 200-week Moving Average, signifying a potential bull market.
CryptoCon, another analyst, drew parallels between Bitcoin’s current cycle and the 2015/2018 cycle, accurately predicting July’s top and August’s bottom. According to CryptoCon’s BitTime model, Bitcoin could hit $47,000 soon and experience a “long sideways period” in early 2024, potentially surging to $130,000 by December 2025.
Factors Driving Bitcoin’s Uptrend
The recent upward trend in Bitcoin’s value has been largely attributed to the anticipation of the United States Securities and Exchange Commission (SEC) approving several spot Bitcoin Exchange-Traded funds (ETFs).
This regulatory development is expected to provide large institutions with unprecedented exposure to cryptocurrency. This Bitcoin ETF sentiment is paramount, considering industry leaders have been advocating for it for the past 10 years. While Vanguard Group and State Street Corp (NYSE: STT) have chosen to stay back, the presence of firms like BlackRock Inc (NYSE: BLK) and Franklin Templeton is poised to change the game eventually.
Furthermore, market investors have been encouraged by widespread expectations that the United States Federal Reserve will begin cutting interest rates in mid-2024. The promise of a more accommodating monetary policy has stoked investor optimism, with investors bracing for the next round of inflation statistics and keeping a close eye on the final Federal Open Market Committee (FOMC) meeting of 2023.
