Since the weekend, bitcoin and the cryptocurrency market have been on a downtrend as investors sell off their holdings, awaiting an excellent opportunity to buy back.
Before the end of Friday, bitcoin’s market structure underwent a sudden and drastic change, sending shockwaves. The cryptocurrency plummeted by nearly 5%, shifting from $72,000, a mere 2.5% away from its previous all-time high, to $68,500 within seven hours. Despite the hopes for a recovery before the new week, it has declined to $66,750 per BTC, forming a significant number of bearish candles.
Here are three (3) why bitcoin and other cryptocurrencies have declined recently.
Three Reasons Why Bitcoin is Dumping
Traders await the Consumer Price Index (CPI) report. Bitcoin dropped below $68,000 this morning as traders expressed anxiety over what to expect from the CPI report and Fed decision, which will be released on Wednesday.
Considering the recent forecast on May CPI, traders fear that interest rates will remain elevated for a long time, making it difficult for cryptocurrency investments to thrive, as traditional investments may seem more promising and attractive to investors, reducing demand for cryptocurrencies.
Spot Bitcoin ETFs record first outflow in 20 days. After a long inflow streak that lasted for 19 days, U.S. spot bitcoin ETFs have witnessed an outflow of $64.9 million. Data from Farside shows that four U.S.-approved spot bitcoin ETFs recorded outflows worth $78.8 million on Monday, with Grayscale leading the sell and discharging about $39.5 million worth of bitcoins.
However, BlackRock’s IBIT and Bitwise’s BITB recorded inflows of $6.3 and $7.6 million, respectively, leaving other ETFs dormant.
Miner Capitulation. Following the last Bitcoin halving, mining rewards have been divided into two, reducing to 3.125 BTC per block. This poses a challenge for weak miners, who struggle to remain in profit after running on high operational costs. These miners are moved to sell off Bitcoin reserves to mitigate losses or cover expenses. The selling pressure has contributed to the recent dump in Bitcoin’s price.
However, historical data reveals that miner capitulation is always short-lived, and the price of bitcoin recovers. Weak miners will exit the industry, while stronger ones will gain more profits as they will have fewer competitors.
Investors Remain Optimistic Despite Bitcoin Dump
Notwithstanding the recent downtrend in the cryptocurrency market, investors and analysts await a bounce back or change in market structure resulting from higher inflows into digital assets.
Renowned financial giant Robert Kiyosaki, known for his bitcoin optimism, has predicted that BTC will surge to $350,000 within the coming two months. Similarly, Jack Dorsey, former CEO of Twitter, envisions bitcoin at $1 million in a few years.
