Bitcoin Plunges Below $60,000! Coin Price Drops 15%
Bitcoin (BTC) has fallen nearly 15% in the past few days, even dropping below the $60,000 mark. This is the worst-performing month for Bitcoin since the closure of the cryptocurrency exchange FTX in November 2022, causing concern among many investors who expected a rapid surge in price after the halving event.
The price of Bitcoin has been gradually declining since April 30th and experienced a sudden drop of 5% on May 1st, falling below $60,000 to $56,789. At the time of writing, the price of Bitcoin is at $57,426, a 14.11% decrease compared to the past month.
Market experts believe there are three main reasons for the weak price of Bitcoin.
Reason 1: Bitcoin Spot ETF Frenzy Subsides
At the beginning of this year, the United States officially approved Bitcoin spot ETFs, and soon after, several large companies such as BlackRock, Invesco, and Fidelity launched multiple Bitcoin spot ETFs, sparking a trading frenzy. These ETFs achieved a record trading volume of nearly $10 billion within three days of listing, pushing the price of Bitcoin from $47,000 to an all-time high of $74,000.
However, as the ETF frenzy gradually subsides, these 11 Bitcoin spot ETFs have transitioned from a net inflow of $4.6 billion in March to a net outflow of $182 million as of April 29th. In other words, more and more people have started selling their ETF holdings.
Standard Chartered, an investment bank, stated that US Bitcoin spot ETFs have seen five consecutive days of outflows, and the current trading price of Bitcoin is below the average ETF purchase price of $58,000.
Although Bloomberg ETF analyst James Seyffart said that the outflow of ETFs is not surprising, he would be surprised if Grayscale’s GBTC experiences net inflows.
Reason 2: Hong Kong Cryptocurrency ETF Fails to Bring Momentum
Hong Kong recently approved Bitcoin and Ethereum spot ETFs, which officially started trading in Hong Kong on Tuesday (4/30).
On the first day of trading, the six newly launched spot cryptocurrency ETFs in Hong Kong achieved a trading volume of HKD 87.5 million (approximately $11.2 million), which is almost insignificant compared to the $4.6 billion trading volume of the 11 Bitcoin spot ETFs launched in the United States. This has disappointed many investors who expected better performance from the Hong Kong ETFs.
However, Eric Balchunas, a senior ETF analyst at Bloomberg, pointed out that considering the difference in market size between Hong Kong and the United States, the data from the first day of trading is already significant for the Hong Kong market.
The disappointing performance of the Asian market has dampened the overall sentiment in the cryptocurrency market, and the price of Bitcoin has been declining since April 30th.
Reason 3: Federal Reserve Postpones Rate Cut
With the continued rise in wage pressures and the possibility of further inflation, investors are becoming less confident about whether the Federal Reserve (Fed) will cut interest rates this year.
Ahead of the Fed’s policy statement (expected to be released around 2 am Taiwan time on May 2nd), the market is worried that Fed Chairman Powell may become more hawkish (supporting the implementation of tight monetary policies to control inflation), causing Bitcoin to experience another round of decline, dropping below $57,000. This is the worst monthly performance since June 2022. Other cryptocurrencies in the market have also been affected, and the decline has continued to expand.
Will Bitcoin continue to fall? Analysts have a unanimous attitude.
A report from Korean blockchain analytics company CryptoQuant indicates that the growth of long-term Bitcoin holders’ holdings has declined, and the outflow of Bitcoin spot ETFs and the increase in short positions in the futures market indicate a slowdown in demand for Bitcoin.
Regarding the recent decline in the price of Bitcoin, market analysts unanimously believe that it may continue to decline. After breaking below the $60,000 mark, Bitcoin analyst Tuur Demeester believes that $50,000 may be the next stop for Bitcoin.
CryptoQuant analysts state that the current price of Bitcoin is already below the cost basis of most traders, which is around $63,000. Therefore, they set the target range at $55,000 to $57,000, which is about 10% lower than the current cost basis of traders.
Analyst Scott Melker believes that $52,000 is a low point that Bitcoin may reach in the short term, but this correction is only about 23%, which is very shallow for a bull market. He also stated, “So far in this cycle, I haven’t seen a 30-40% correction like in the past.”
Trader and analyst Mags also stated that if Bitcoin closes below $60,000 on a weekly basis, deeper retracements are expected, even dropping to $40,000 or lower. He further explained that in this cycle, there have already been four retracements between 20-22%. If a similar situation occurs, a 22% retracement from the high point would bring the price to $58,000 to $57,500.
References:
cointelegraph, cointelegraph