On Monday we saw cryptocurrency market plummet along with the largest currency by market cap, Bitcoin, which also fell to the tune of almost 4%.
While many investors expected that after the U.S. Securities and Exchange Commission (SEC) authorization two weeks ago, which gave the green light to Bitcoin spot ETFs, crypto prices would experience a big upward movement, this is not how things are turning out this week.
The downward movement could have occurred due to different factors, pushing the BTC price below the psychologically important 40,000 USD level. These prices have not been seen since the beginning of December 2023.
To begin with, we have to realise that Bitcoin has been on a significant bull run since September 2023. It has seen growth of more than 90% in less than a year. Investors may now be liquidating their positions after seeing the price reach almost the 49000 USD per BTC zone, and these possibly massive sales could have knocked down the price.
The market was very news-driven in Q4, with intense speculation on which way the SEC would jump. Smart money – and The Armchair Trader – was backing approval. With that out the way, focus has shifted to the next big piece of news for BTC, which will be the Halving event in May. Investors seem less convinced about this, but it is early days.
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Bitcoin miners are hitting the sell button
Another factor that could have contributed to Bitcoin’s collapse is that some miners have started selling their Bitcoins as happened a few months before the May 2020 halving. This event, which will occur in April 2024, is a process that will reduce the rewards for mining Bitcoin.
“Faced with the possibility of changes in the value of the digital asset, miners could take advantage of good price opportunities to accelerate their liquidations and this oversupply could push the price down,” said Antonio Ernesto Di Giacomo, a crypto analyst with CFD broker XS.com.
Outflows from the Grayscale Investments ETF
Grayscale Investments has experienced outflows of more than $2.8 billion in its exchange-traded fund since its conversion earlier this month. Grayscale accounts for more than 95% of these outflows, and there is speculation that this could be due to its high fees and to possible profit-taking by investors.
However, another report suggests that the bankrupt FTX exchange could be responsible for some of the outflows, as it sold 22 million Grayscale shares, valued at around $1 billion, as part of its liquidation process to compensate victims.
Speculative money could now also be shifting its focus from crypto to other assets, including the recent boom in US tech stocks. After all we just saw historical highs from the three most important American indexes, S&P 500, Dow Jones, and Nasdaq, plus new highs from technology companies like Meta [NASDAQ:META], Google [NASDAQ:GOOGL] and Microsoft [NASDAQ:MSFT], to name but a few.
In conclusion, there could be many factors that have influenced the price of the most dominant digital currency in the market, creating this downward movement. The cryptocurrency market, including Bitcoin, is highly influenced by fundamental information, predicted and not predicted, which could affect the price at any time.