Bitcoin Crash: Factors Behind Recent Bitcoin Price Plunge

Bitcoin Crash: Why is Bitcoin Price Falling Today?

Key Reasons Behind Bitcoin Crash

A number of factors could trigger a Bitcoin crash today, dampening investor sentiment. Some of the prominent reasons are –

Trading volume thin ahead of FOMC meeting

Markets appear to remain subdued and investors remain cautious ahead of the Federal Open Market Committee's (FOMC) decision. Recent higher-than-expected inflation data, including the U.S. Consumer Price Index (CPI) and Producer Price Index (PPI), have dampened market sentiment.

Meanwhile, investors had expected five rate cuts in 2024, but recent inflation data has forced investors to change their bets to just three. The CME FedWatch tool shows a 99% chance that rates will be unchanged tomorrow.

Now, investors appear to be trading cautiously, awaiting further signs of the Fed's future policy decisions. This cautious approach highlights the market’s sensitivity to central bank actions and their potential impact on asset prices, including Bitcoin.

Bitcoin ETF outflows spark concerns

After a period of bullish momentum fueled by strong inflows into U.S. spot Bitcoin ETFs, there was a significant shift on Monday, with outflows occurring for the first time this month. Notably, Grayscale’s GBTC saw its highest outflows since inception at $642.4 million, surpassing inflows from BlackRock’s IBIT, which saw $451.5 million.

Meanwhile, U.S. spot Bitcoin ETFs saw overall outflows of $154.3 million yesterday, dampening sentiment among market participants. Notably, some analysts believe this trend was a factor in the recent Bitcoin crash, indicating potential challenges amid continued market volatility.

Whale selling sparks FUD

In a recent development, a Bitcoin whale dumped over 400 BTC on the BitMEX exchange, causing the price to temporarily plummet to $8,900. However, the market soon rebounded quickly to normal levels.

Meanwhile, the sell-off by whales has reignited concerns about profit-taking strategies in the ongoing bull market, with investors seizing the opportunity to profit from Bitcoin's recent rally. In other words, the incident highlights the volatility of the cryptocurrency market and the cautious approach some investors are taking amid price swings.

Analysts warn of pullback ahead of halving

As CoinGape Media reported earlier, popular cryptocurrency analyst Rekt Capital warned that Bitcoin is about to experience a pre-halving correction, which is likely to occur 28 to 14 days before the expected halving event. Historical trends also show a similar pattern, with previous halvings experiencing significant plunges, such as a 38% drop in 2016 and a 20% drop in 2020.

While past performance is no guarantee of future results, investors still need to prepare for potential market volatility ahead of the upcoming halving.

Cryptocurrency market clearing

According to CoinGlass data, 222,681 traders faced liquidations in the crypto market in 24 hours, totaling $524.33 million. Notably, Bitmex saw the largest single liquidation order on XBTUSD, amounting to $9.01 million.

Meanwhile, Bitcoin took a hit, with liquidations reaching $130 million, mostly from long traders ($102 million) and short traders ($28 million). This massive wave of liquidations led to the recent Bitcoin crash and reflects heightened volatility and uncertainty in the crypto space.

Bitcoin Futures OI and RSI

Bitcoin futures open interest (OI) fell slightly, falling 0.76% in the past 24 hours to 532.75 million BTC, or $34.12 billion, according to data from CoinGlass. Specifically, CME exchange fell 4.53% to 168.79K BTC, or $10.78 billion, while Binance exchange fell 3.39% to 114.88K BTC, or $7.36 billion.

However, despite the decline in Bitcoin OI, Bitcoin’s relative strength index (RSI) remains at 50, indicating neutral market sentiment.

bottom line

Amid the recent Bitcoin crash, prominent cryptocurrency market analyst Ali Martinez has provided insights into key levels for BTC price. In a recent X post, analyst Ali Martinez highlighted key support and resistance levels.

According to Martinez’s analysis, Bitcoin’s key support thresholds are $61,100, $56,685, and $51,530. Conversely, key resistance points are $66,990 and $72,880. These insights provide valuable guidance for investors navigating the volatile cryptocurrency market landscape.

At the same time, as of press time, the price of Bitcoin was reported at US$63,228.23, down 6.82% from yesterday, and the transaction volume increased by 48% to US$60.92 billion. In the past 24 hours, BTC price hit a high of $68,552.94 and is currently trading at its lowest levels in the same time period.

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