On Thursday, the cryptocurrency market experienced a significant downturn, led by Bitcoin, which retreated to $40,000. According to Coin Metrics, Bitcoin was trading 3.6% lower at $41,167.14, hitting a low of $40,601.37, marking its lowest level since December 18. Ether, another prominent cryptocurrency, also faced a decline, dropping 3% to $2,448.41. The broader cryptocurrency market followed suit, witnessing a collective decline.
The impact of Bitcoin’s movement extended to related stocks, with Coinbase and MicroStrategy ending the trading day down 7% and 2%, respectively. Mining companies CleanSpark and Marathon Digital experienced losses of over 6%, while Riot Platforms fell 5%, and Iris Energy retreated by 8%.
The correction in Bitcoin prices has been attributed to the aftermath of the exchange-traded fund (ETF) launch. Julio Moreno, the Head of Research at crypto data provider CryptoQuant, noted that short-term traders and major Bitcoin holders are actively selling in the context of a risk-off sentiment. Additionally, unrealized profit margins, though reduced from December, may need to fall further for sellers to exhaust their positions.
The unrealized profit of short-term Bitcoin holders has decreased from 48% in December to about 16% this week. However, Moreno suggested that it might need to drop below 0% to signal a definitive bottom in Bitcoin prices. Another concerning trend is the cessation of Bitcoin flows to derivative exchanges, a pattern that has historically signaled bear markets or price corrections.
Since the U.S. Securities and Exchange Commission (SEC) approved Bitcoin ETFs for trading on January 10, Bitcoin has witnessed a 12% decline. While the long-term uptrend remains intact, analysts caution that there could be further declines. Rob Ginsberg from Wolfe expressed concerns about a potentially disappointing first quarter of the year.
Moreno, in an earlier projection, anticipated that the post-ETF correction could bring Bitcoin down to as low as $36,000. The cryptocurrency is currently down about 3% for the year, after closing 2023 with a notable gain of 157%.
The cryptocurrency market’s volatility remains a focal point, with various factors influencing price movements. The regulatory environment, macroeconomic conditions, and market sentiment continue to play pivotal roles in shaping the trajectory of cryptocurrencies. Investors and analysts closely monitor these developments to make informed decisions in the ever-evolving landscape of digital assets.
As Bitcoin and other cryptocurrencies navigate the complexities of the market, stakeholders brace for potential shifts and fluctuations. The post-ETF correction, combined with broader market dynamics, underscores the challenges and uncertainties inherent in the cryptocurrency space. While some anticipate a recovery, others exercise caution in navigating the dynamic and often unpredictable world of digital currencies.
