During the last few months, Bitcoin has had a thriving market performance. By mid-March, it even reached a new all-time high, at $73,750. But, at the time of writing, it is down 14% from this value. It got even lower in the first week of July, at $55,849, 25% lower than its ATH.
2024 promised to be a positive year in the crypto market. BTC still shows a 50% growth year to date. But is the recent price drop something to worry about? Would it be smart to buy Bitcoin with a debit card now, or is the price likely to drop even lower? Let’s analyze some key factors in the market to answer this question.
3 Reasons Why Bitcoin Price Goes Down
There are numerous factors that can drive the price of Bitcoin down: from movements and trends inside the crypto market itself to external events that can affect investors’ trust and appetite for risks.
1. Whale Movements and Large Sell-Offs
In the crypto markets, there are large investors called whales. These investors hold a huge amount of coins and can have an effect on the price if they make sudden movements. For example, if a whale or group of whales sells off a large amount of BTC, the extraordinary order causes the price to fall quickly.
This sudden drop, consequently, will cause panic in smaller investors, who will rush to sell their positions to prevent further losses. The selling positions snowball and the price is impacted by this up to a certain point. The decision of the whale to sell can vary, but it often happens when the price goes up rapidly, leading them to cash out some earnings.
2. Regulatory Uncertainty and Legal Actions
Bitcoin, as well as the rest of the crypto market, is still in the grey area regarding financial regulation. In some jurisdictions, they are outright banned, while others heavily regulate them. In general terms, Bitcoin seems to be on the clear in the US for now.
There have been approved ETFs since December 2023, and Gary Gensler, chairman of the Securities and Exchange Commission (SEC), has stated that BTC is a commodity, not a security. But, in the end, other representatives, either on the SEC or the CFTC (Commodity Futures Trading Commission), may take new measures in the future. This uncertainty can lead investors away, especially in times of political and economic turmoil, like we have now in the US.
3. Global Events Triggering Flight to Safety
Related to the last point mentioned, conflicts, both in the US and in a broader landscape, can drive investors away from volatile assets like Bitcoin. Markets in general need a stable environment, especially when it comes to assets as volatile as cryptocurrencies. This year, we have a controversial election in the US, as well as conflicts in Europe and the Middle East.
This aspect can be disputed since they were already happening by the time Bitcoin started its bullish trend. However, the conjunction of these events, along with the political turmoil happening in the US, can alter the perception of investors. The US is home to plenty of huge BTC holders and investors, as well as some major exchanges.
Current Bitcoin Price Analysis
The price of BTC has lost around 15% since its latest ATH, but it’s too soon to call for a bearish trend already. In any case, the market could be experiencing a correction, after a few months of sustained growth. According to some financial analysts, it could drop as low as $50,000, before it starts going up again. And that could be a good point to buy again.
Technical Analysis
In the short term, the price is likely to keep dropping, following technical analysis made by market experts. Investors are losing optimism in future price increases, and this diminishes the amount of new money flowing into the market. In the medium term, the market sentiment is more positive than in the short term, but it’s still not high enough to consider a strong upward trend. In the coming months, the advice would be to hold positions, rather than making big investments in the coin.
For longer terms, analysis foresees a return to negative sentiments. Although it’s unclear how low BTC could drop, it’s important to be wary. However, it’s good to remember that buying the dip is a simple but effective investment strategy.
Fundamental Analysis
There is no doubt that Bitcoin has an intrinsic value, despite any periodical price swing. From time to time, various events around the world can impact the price, but in the long run, BTC overcomes this.
Something that could be contributing to Bitcoin’s recent drop is the sale of over 20,000 BTC by the German government. In January, almost 50,000 BTC involved in illegal activities were seized by German authorities. Around June, they started selling these coins, increasing the supply of BTC in the market. This could keep going in the coming months, while they continue to sell the seized assets.
But this isn’t necessarily negative. Following this Bitcoin investment guide, we can see strategies like dollar cost averaging, or swing trading. These can offer some gains both in the short term and in the longer term if you decide to hodl.
Sentimental Analysis
If we take a closer look at psychological analysis, it’s notable that investors went through a period of fear. This can be noticed in the recent drop. But in the last few days, indicators have moved a bit towards the greed sentiment. So it’s likely that there’s a small influx of new money into Bitcoin.
Future Trajectory
Taking a look at these different analyses as a whole, the wisest decision is to be wary, but keep a foot in the ground. The price of Bitcoin will likely experience some ups and downs in the coming months, before returning to its frontal bullish trend. It may not reach a new ATH at least until the last quarter of the year, but there could be some small gains.
