Bitcoin (BTC), known as a popular and decentralized digital currency, is struggling to grow in value. It recently attempted to go above $90,000, but this effort was unsuccessful. Now, Bitcoin is under pressure after falling below an important long-term trend line. Analysts are saying this could lead to prices dropping further.
Could Bitcoin Drop by 50%?
One expert, Ali Martinez, pointed out that whenever Bitcoin drops below its 50-week Simple Moving Average (SMA) in the past, it usually loses around 54% of its value. The 50-week SMA is a tool to check long-term trends in prices—it’s like a dividing line between good (bullish) and bad (bearish) market conditions. If Bitcoin stays below this line for too long, it may cause a big decrease in prices toward the $40,000 range.
Martinez didn’t say Bitcoin will crash immediately, but there’s more risk of a price fall if Bitcoin fails to go back above the 50-week SMA soon. A blockchain analytics company, CryptoQuant, also shared that Bitcoin is now in a later stage of recovering after reaching its all-time high (ATH). They highlight weak demand for Bitcoin, meaning not enough people are actively buying it. This weak demand limits Bitcoin’s ability to bounce back up in price.
Currently, overall interest in the market is very low, with “Extreme Fear” dominating market sentiment. Market sentiment is how investors are feeling about future price changes—it can be positive (bullish) or negative (bearish). Right now, people do not want to take risks by investing, so demand stays low.
Spot Bitcoin ETFs and Other Demand Indicators
Even though there has been a record interest in spot Bitcoin ETFs this year, prices have not improved. Spot Bitcoin ETFs allow investors to buy bitcoin indirectly without owning it. However, other signals of demand are still weak. For example, the Coinbase Premium Index, which shows the difference in cryptocurrency prices between Coinbase and other exchanges, remains negative. This shows less interest from U.S. investors.
Furthermore, “whales,” or big investors who usually buy large amounts of Bitcoin, are slowing down their purchases on major exchanges like Binance, the largest cryptocurrency trading platform. Instead, activity has been noticed in older Bitcoin accounts holding coins for 7-10 years. Such accounts tend to become active during “distribution phases,” where people sell more than they buy ahead of big changes in the market.
Analysts believe Bitcoin might continue to trade within a limited price range for now, but with a slight downtrend. Demand needs to get stronger for Bitcoin’s price to increase meaningfully.
Strange Price Glitch Causes Confusion
Instead of the usual year-end price boost (sometimes called a Santa rally), Bitcoin faced an unusual event. On the Binance platform, Bitcoin’s price suddenly dropped to $24,111 on a specific trading pair called BTC/USD1. Then it quickly went back up to over $87,500 within seconds. This odd price movement was limited to the USD1 pair only and didn’t appear in other Bitcoin trading pairs.
The USD1 pair is tied to a stablecoin backed by the Trump family and World Liberty Financial (WLFI). Stablecoins are cryptocurrencies made to have a stable value similar to regular money like the U.S. dollar. Binance later said this event was caused by liquidity issues (not enough buying and selling activity). There were no actual changes to Bitcoin’s fundamentals or any major sell-offs.
An analyst named Joao Wedson explained that these kinds of events are more common during bearish market phases when prices are trending down overall. So, even though this was an odd glitch, Bitcoin’s prices remain uncertain going into 2024.
The original article was published by CryptoPotato.