This Monday, 22/01/2024, we saw how the cryptocurrency market plummeted, as well as, the largest capitalized currency, Bitcoin, also did so with almost of 4%.
It was speculated that after the U.S. Securities and Exchange Commission (SEC) authorization on January 10, 2024, gave the green light to the Bitcoin spot ETF, it would have a big upward movement, as the cryptocurrency could reach a more significant amount of new investors, but that did not happen as expected.
This downward movement could have occurred due to different factors, making the price reach below 40000 USD per BTC. These prices have not been seen since the beginning of December 2023.
To begin with, we have to identify that Bitcoin has been on a significant increase since September 2023. It has had a growth of more than 90% in less than a year. Investors could have liquidated their positions after seeing the price reach almost the 49000 USD per BTC zone, these possible massive sales could have knocked down the price.
Another factor that could have contributed to Bitcoin’s collapse, today, could be that miners start selling their Bitcoins as it happened a few months before the May 2020 Halving.
This event, which will occur in April 2024, is the process that reduces the rewards for mining Bitcoin. Faced with the possibility of changes in the value of the digital asset, miners take advantage of good price opportunities to accelerate their liquidations and this oversupply could push the price down.
We could also point out that Grayscale Investments has experienced outflows of more than
$2.8 billion in its exchange-traded fund with its Bitcoin ETF 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.
Likewise, we could indicate that due to the great rises of different assets that the traditional financial markets had last week, investors turned to them.
Among them we could highlight the historical highs of the three most important American indexes, S&P 500, Dow Jones, Nasdaq, the new highs of technology companies, Meta (formerly Facebook), Google and Microsoft, to name a few.
In conclusion, there could be many factors that have influenced the price of the most dominant digital currency in the market, to have 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.