Why did Bitcoin fall sharply from its all-time high? What happens next?

Bitcoin’s decline is related to a variety of factors. One is that traders are starting to take profits, and the other is the uncertainty of when U.S. interest rates will be cut.

Bitcoin has fallen sharply from its all-time highs.

The world's largest cryptocurrency fell to $66,885 in the early hours of Friday, a drop of 9%. Just yesterday, the digital asset hit an all-time high of $74,000.

It’s difficult to pinpoint a single reason for Bitcoin’s sudden decline, as there are several reasons at play.

First, after an extraordinary bull run in which Bitcoin surged 175% over the past 12 months, many cryptocurrency traders will be taking profits.

Another reason is broader uncertainty about the global economy, with higher-than-expected inflation in the United States dimming hopes of a rate cut.

City Index analyst Matt Simpson explained: “Bitcoin’s volatility and ruthlessness after hitting all-time highs is there for all to see.”

Not only has Bitcoin hit new highs recently, but it doesn't appear the Fed will be as dovish as traders hoped.

In the past, Bitcoin has tended to operate in boom and bust cycles, with each peak proving to be significantly higher than the last.

This is partly driven by the rare “halving” event that occurs every four years.

As the name suggests, "halving" means that the number of new Bitcoins entering the market is permanently reduced by 50%.

The next halving is scheduled to take place in April, which means that only 450 Bitcoins will be produced every day.

Overall, the maximum supply of Bitcoin is 21 million – and enthusiasts believe this scarcity is where Bitcoin’s value lies.

Another new development this year is the U.S.’s approval of Bitcoin exchange-traded funds, which allow U.S. investors to gain exposure to Bitcoin’s price without owning it directly.

Article forwarded from: Golden Ten Data

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