Why is Bitcoin’s price falling amidst geopolitical tensions and halving event?

Category: Blockchain Crypto

The recent period has been challenging for Bitcoin as its value has been fluctuating significantly. In just one day, Bitcoin price can reach as high as $70,000 and then drop to nearly $60,000 the next day.

Despite facing a market crash, there have been several developments surrounding the coin, and it is still expected to fulfill the expectations of investors and supporters by increasing in value after the upcoming Bitcoin halving.

This article aims to explore the reasons behind the drop in Bitcoin price and whether this trend will eventually reverse.

Performance of the Bitcoin market price at present

The price of Bitcoin has fluctuated between $62,332.07 and $66,878.65 in the last 24 hours, ultimately settling at $63,000 today.

Over the past day, the top cryptocurrency experienced a decrease of 4.52% in its value, and a decrease of 11.33% over the course of the week. As a result, the market capitalization of BTC has decreased by 4.47% to reach around $1.24 trillion. Despite this dip, the coin remains the leading cryptocurrency, as reported by CoinMarketCap.

Bitcoin’s trading volume has seen a 6.37% increase, reaching approximately $45.16 billion. This signifies a moderate level of trading activity compared to the market size, as shown by the volume-to-market cap ratio of 3.49%.

Major factors behind the decline in Bitcoin price

1. Conflicts in geopolitics

The recent escalation in tension in the Middle East, following an attack on Israel by Iran, is considered one of the main factors for the decrease in BTC price. The value of Bitcoin dropped by 8.4% to its current price of around $62,000 from $67,000. This sudden decline caused a market capitalization loss of over $130,000 million within a short span of time, which also affected other cryptocurrencies like Solana and Ethereum across all crypto exchanges.

The uncertainty and potential risks in the geopolitical landscape have led investors to move away from risky markets like cryptocurrencies and turn towards safer options such as gold and the U.S. dollar.

President Biden’s warning of potential future attacks has only added to the concerns about a larger regional conflict, contributing to the volatility and uncertainty faced by BTC and the global crypto market.

2. Retracement before halving

One of the main factors contributing to the decrease in BTC price is its current retracement phase before the halving event. This is a typical occurrence before the actual halving of Bitcoin. The retracement follows a pattern seen in previous trends, where the value of Bitcoin has historically fluctuated in the days leading up to the halving event.

The decline prior to the halving usually starts approximately 18 days before the projected date of the halving, specifically on April 20.

Currently, it is not uncommon for Bitcoin to undergo a temporary decline in its value, as it has done in the past. During the 2020 halving cycle, the cryptocurrency saw a 20% decrease in price prior to the halving event.

The retracement plays a crucial role in determining the bottom of the re-accumulation period that comes after the halving event. This period defines the price boundaries within which Bitcoin will be traded following the halving.

In past cycles, the pre-halving retracement has served as a foundation for the re-accumulation range, with the bottom of the range usually being at approximately $60,600.

Based on past data, it is predicted that Bitcoin will maintain its current low range. However, according to Rekt Capital, a crypto trader and analyst, there is a chance of unforeseen price volatility below this range. This could potentially present investors with chances to purchase at discounted prices in anticipation of the post-halving period and the subsequent upward trend.

Expert states that the pre-halving retracement and re-accumulation range are linked together, presenting a significant chance for investors to establish their positions prior to the expected parabolic upward trend which often takes place several months after the halving event.

3. Closing out long positions

The drop in Bitcoin’s worth can be attributed to the shutting down of long positions in the Bitcoin futures market. The market experienced considerable instability, as evidenced by the high number of liquidations, indicating a significant shift.

According to data from Coinglass, long positions worth over $43.7 million were closed within 4 hours, with a sudden surge to $20.6 million. As a result of a decrease in buying activity, Bitcoin’s trading volume decreased by a significant amount of $24 billion from its peak of $45 billion on March 5.

4. Outflows of Bitcoin ETFs

Recently, there has been a recorded instance of withdrawals from U.S. Bitcoin exchange-traded funds (ETFs), with the exception of BlackRock’s BTC ticker ETF which received investments in the last two days.

As per data from Farside Investors, iShares Bitcoin Trust (IBIT) had a net inflow of $73.4 million on April 15. However, this was overshadowed by the outflows from the Grayscale Bitcoin Trust (GBTC).

All ten existing spot Bitcoin ETFs also experienced net withdrawals on April 14 and 15, amounting to $55.1 million and $36.7 million respectively. Furthermore, there were outflows from global Bitcoin investment products, indicating a hesitancy among investors and contributing to the downward pressure on Bitcoin’s value.

In general, the cryptocurrency market is currently experiencing fluctuations, as investors exercise caution in their decision-making.

Final thoughts

The decrease in the value of Bitcoin can be linked to a combination of political tensions, market corrections, the closure of long positions, and withdrawals from Bitcoin exchange-traded funds (ETFs).

While these elements may cause temporary uncertainty, the overall outlook for Bitcoin remains positive as the market adjusts to these obstacles. Investors should stay informed and exercise caution when navigating the volatile world of cryptocurrencies.