Bitcoin Plunges by 2% : Deep Dive into Causes and Prospects
The Bitcoin seemed poised to hit a new all-time high in recent days. However, the trend abruptly reversed yesterday, with a nearly 2% drop in price. What are the reasons behind this sudden correction? And what opportunities can investors seize?
Several factors may explain this sudden drop in the price of Bitcoin. Firstly, the American stock market also experienced a similar decline. It is possible that investors decided to cash in on a large scale, triggering a wave of selling. Some even attribute it to the current Iran war tensions.
However, another significant factor is the unexpected success of a recent auction of 10-year US Treasury bonds. This issuance attracted a mass inflow of investors, leading to a temporary flight to the safe-haven value of bonds.
“There’s been talk lately that investors have lost faith in US Treasury bonds. But yesterday, slightly lower-than-expected inflation in the US reduced the chances of a Federal Reserve rate cut, generally advantageous for government bond demand.”
This trend came at the expense of riskier assets like Bitcoin, as well as traditional stocks. However, this shift towards bonds may be temporary, hinting at a potential return to rising cryptocurrency prices.
Profit-Taking and Breaking the $110,000 Threshold
As indicated by French analyst Sapiens, Bitcoin faces not only a resistance but also profit-taking by investors. In fact, 95% of the circulating supply held by Short Term Holders was in profit. This threshold is typically followed by investor sales:
“Bitcoin aims to break a record. But it carries a backpack full of ‘unrealized gains.’ You don’t jump a meter higher with 20kg on your back. You need to ‘unload.’ Let the sellers exit. Lighten up to take off. And that’s exactly what the market is doing,” Sapiens wrote.
Moreover, Bitcoin encountered short zones placed at $110,000. Over 600 BTC were placed for sale at $110,000, according to Coinglass.
Currently, BTC is resting on long buy orders, which could support a consolidation before moving forward. Over 800 BTC are placed for sale on futures markets between $110,200 and $110,400.
In essence, this drop appears to be a mere “pullback” before retesting highs. However, caution is advised as BTC could still drop to $106,000, although the likelihood decreases over time.
