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Bitcoin’s unprecedented drop has left investors scratching their heads and wondering what could be causing such a drastic fall. In just 24 hours, the cryptocurrency market lost nearly $99 billion in value, with Bitcoin losing over 4% of its value.
While there is no single reason for the sudden crash, we can identify several key factors that are contributing to this sell-off.
One major factor behind Bitcoin’s decline is the uncertainty surrounding the US government’s plans on a strategic bitcoin reserve. The market initially reacted positively to President Trump’s announcement, with Bitcoin surging past $92,000. However, as investors realized that the executive order did not provide clarity on how the government would acquire more Bitcoin or hold onto its seized BTC, skepticism set in.
This uncertainty has led many investors to take a step back and reassess their positions, resulting in a sharp sell-off. Some experts, like Peter Schiff, have expressed concerns that the lack of clear accumulation plans could negatively impact Bitcoin’s long-term growth.
Another significant factor driving this market downturn is the massive outflow from Bitcoin spot ETFs. According to Farside data, these funds saw an unprecedented $134.3 million in withdrawals over a 24-hour period. This is particularly concerning as no other major fund recorded inflows, indicating that institutional investors are selling off their holdings en masse.
Leading this sell-off were BlackRock’s iShares Bitcoin Trust (IBIT), Grayscale Bitcoin Trust (GBTC), and Franklin Templeton’s fund, which all reported significant outflows. This mass withdrawal of funds is placing immense pressure on the market, further contributing to the drop in price.
Furthermore, market liquidations are also playing a key role in this sell-off. In the past 24 hours, traders lost an astonishing $531 million, with long positions accounting for $398.3 million of these losses. This mass liquidation has led to an increase in selling pressure, exacerbating the decline in Bitcoin’s value.
Finally, technical analysis suggests that Bitcoin is struggling to hold its key support level at around $89,041. If this level is breached, it could lead to further declines towards $85,000 or even $82,761. However, if the market manages to flip the resistance level of $90,800 into support, a recovery towards $93,625 might be possible.
In conclusion, there are several key factors at play in Bitcoin’s sudden crash. The uncertainty surrounding the US government’s plans on a strategic bitcoin reserve, combined with the massive outflow from spot ETFs and market liquidations, has led to an unprecedented sell-off.
Source: https://coinpedia.org/news/why-is-bitcoin-price-dropping-key-reasons-behind-the-sudden-crash/
