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The leading cryptocurrency, Bitcoin, has experienced a significant decline, falling below the $39,000 threshold and causing apprehension within the crypto community. Although market enthusiasts anticipated a bullish run following the U.S. SEC’s approval of Spot Bitcoin ETFs, the reality of the Bitcoin (BTC) price crash seems starkly different.
Meanwhile, analysts have delved into the market trends, uncovering five potential triggers behind the unexpected selloff. So, let’s dissect the key factors behind the recent Bitcoin (BTC) price crash.
Potential Reasons Behind Bitcoin (BTC) Price Crash
Although there is a flurry of factors that generally impact the sentiment of the crypto market, here are five key reasons behind the recent dip in Bitcoin price:
FTX’s selloff
A significant blow to the crypto market came with the revelation of FTX’s nearly $1 billion selloff of Grayscale’s Bitcoin Trust (GBTC) shares. The now-bankrupt FTX, amid its bankruptcy process, liquidated all 22 million GBTC shares to meet creditor obligations.
Notably, this move, though crucial for FTX’s financial restructuring, has cast a shadow on the market’s stability.
ETF Approval & Volatility
The SEC’s approval of the U.S. Spot ETFs has triggered optimism among the crypto market enthusiasts, but the positive momentum was short-lived. Meanwhile, Grayscale, a key player in the crypto space, faces backlash for its role in dragging down the market.
Despite the SEC’s approval of eleven spot Bitcoin ETFs, Grayscale lags in trading volume compared to counterparts like BlackRock. Massive outflows from Grayscale’s GBTC, totaling $3.4 billion, with an outflow of $640.5 million in its seventh trading day and significant Bitcoin transfers to various exchanges, have intensified market pressures.
Meanwhile, several critics, like Bitcoin advocate Nic Carter, dub Grayscale’s GBTC as a “gigantic wrecking ball of toxic waste.”
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Investors Eyeing Profit-Booking Opportunities
Amid the anticipation of a price rally post-Spot Bitcoin ETF approval, some investors seized the opportunity for profit-booking. The surge in Bitcoin’s price throughout 2023, driven by ETF optimism and the upcoming halving event, prompted investors to capitalize on short-term gains.
However, the market pundits remain optimistic about the ETF’s potential to attract significant inflows in the future, potentially driving Bitcoin to new all-time highs.
Regulatory Concerns
The SEC’s aggressive stance against crypto players like Coinbase, Binance, and Ripple, among others, coupled with negative sentiments from figures like Senator Elizabeth Warren and SEC Chair Gary Gensler, has created uncertainty. Key global players, including the EU, South Korea, and others, exploring comprehensive regulations, further contribute to investors seeking clarity before committing to the crypto sector.
A Pause Ahead Of Key Economic Data
As the week unfolds with crucial economic data releases, including U.S. GDP for Q4 2023 and PCE inflation data, investors brace for potential market impacts. In addition, key indicators, such as the Consumer Price Index (CPI), scheduled for next week, are anticipated to offer insights into the U.S. economic health.
Although the Federal Reserve is expected to announce three rate cuts in 2024, any hawkish moves by the Federal Reserve, deviating from the expected three rate cuts this year, could trigger additional selloffs in the crypto market.
Analyst Warns Further Slump In Bitcoin Price
Bitcoin’s recent tumble unveils a complex interplay of factors, from FTX’s restructuring to regulatory uncertainties and profit-booking strategies. As the crypto community navigates through these challenges, the future remains uncertain.
However, market players brace for potential shifts, with eyes keenly set on economic indicators and regulatory developments, hoping for a resurgence that will reshape the crypto narrative in the days to come. But, the recent remarks from top crypto analyst Ali Martinez have further weighed on the sentiments.
In a recent X post, analyst Ali Martinez warns of a possible Bitcoin downturn to $32,700, citing historical retracement patterns. Notably, Martinez highlights the correlation between Bitcoin’s recent surge to the 78.6% Fibonacci level and previous cycles, indicating a potential correction to the 50% Fibonacci retracement.
According to him, if history repeats, BTC could experience a significant dip, prompting investors to monitor the $32,700 level closely. The analysis serves as a cautionary note in the volatile crypto market, urging stakeholders to stay vigilant amid potential price adjustments.
Meanwhile, as of writing, the Bitcoin price traded at $38,963.66, down 4.17% over the last 24 hours. However, its trading volume soared 83% to $31.04 billion in the same time frame. Over the last 30 days, the crypto has lost around 11% in its price.
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