Is the Bitcoin Price Drop Almost Over?
Many people who invest in Bitcoin are confused right now. The price has been going down, and nobody is sure if it will keep dropping or if it has reached its lowest point.
Last week, Bitcoin’s price went up by 15%, which was exciting. But then, it quickly dropped again at the start of this week because a lot of people started selling.
However, a new report from Bitfinex Alpha suggests the price drop might be almost over. Let’s look at the three main reasons why they think this.
1. Risky Bets Are Being Cleared Out (Deleveraging)
Some traders make very risky bets by borrowing money to invest more than they actually own. This is called trading with leverage. When the price drops suddenly, these traders are forced to sell everything to pay back their loans. This process is called deleveraging.
According to Wikipedia, deleveraging is when a company or individual tries to reduce their total financial debt. In the crypto market, this recently happened when a price crash on October 10 forced risky traders out of the market. While this causes prices to drop quickly, it also makes the market healthier and more stable for long-term investors.
2. Scared Investors Have Given Up (Capitulation)
When prices fall fast, many new or nervous investors get scared. They worry the price will go to zero, so they panic and sell their Bitcoin, usually at a big loss. This is called capitulation.
Wikipedia defines capitulation in finance as the point when investors give up on trying to recapture lost gains and sell their positions. This often signals that the worst of the selling is over. Once most of the panicked people have sold, there isn’t as much pressure pushing the price down anymore.
3. There Are Fewer People Left to Sell (Seller Exhaustion)
If you look at a Bitcoin price chart, you can see signs that the sellers are getting tired. The chart is filled with small “candlesticks” (the bars that show price movement), which suggests that the panic-selling has slowed down. This is called seller exhaustion. It’s a clue that the downward trend might be running out of steam.
Big Investors Are Still Buying
Even with the price going down, some big professional investors (called institutional investors) are still very positive about Bitcoin. They have been buying a lot of Bitcoin through something called an Exchange-Traded Fund (ETF).
An Exchange-Traded Fund (ETF) is a type of investment that is traded on stock exchanges, much like stocks. A Bitcoin ETF allows people to invest in Bitcoin without having to buy and store the cryptocurrency themselves.
The fact that these large investors are putting millions of dollars into Bitcoin ETFs shows they believe the price will go up in the long run.
The original article, “Is Bitcoin Near a Bottom? Early Indicators Point to Yes (Bitfinex Alpha),” was first published on CryptoPotato.