Bitcoin's price continues to fall, dragging down the broader cryptocurrency market. BTC has fallen 4.52% in the past 24 hours, and ETH is down 4.10%. Bitcoin's current price is $26,289, marking the lowest since March 14th of this year, when it was as low as $26,544.
Why Are Bitcoin and Cryptocurrencies Falling?
As always, the reasons for a deep retracement in Bitcoin's price are complex. Notably, good news actually arrived on Wednesday, May 10th, as the continued drop in CPI led to a rise in Bitcoin's price to $28,317.
However, the market was subsequently shocked by fake news of the U.S. government allegedly selling 9,800 BTC. The price of Bitcoin plummeted as a result and seems unable to recover. But this narrative is only half the story.
Several other factors are currently suppressing the crypto market: the Dollar Index (DXY) is currently experiencing a rebound, recently standing firm at a historically important support level; liquidity issues are again intensifying with the exit of U.S. market makers Jump and Jane Street; BTC has formed a (hypothetical) head-and-shoulders pattern in the 1-day chart; congestion on the Bitcoin and Ethereum blockchains; and last but not least, a lot of FUD (U.S. government sell-off, Binance US, and Grayscale).
Unsurprisingly, uncertainty is very high in the Bitcoin and cryptocurrency market at present. The Dollar Index (DXY) is currently hovering above the key historical support level of 101.8. Since the beginning of April, the DXY has been suspiciously close to the support level but has so far been able to withstand any bearish assault.
As Christopher Inks of Texas Wet Capital wrote, the DXY rose again yesterday (to 102.056), currently preventing a rebound in risk assets:
The $DXY rally is making longs difficult this morning. So, if you’re trying to get long on risk-off assets it’s best to wait and watch for a bit.
Liquidity Issues, Bearish Chart Patterns, and FUD
Another heavy blow to the crypto market on Tuesday was the news of Jump and Jane Street leaving the U.S. crypto market. The move by the two major market makers is due to regulatory uncertainty in the U.S.
Liquidity has always been a huge issue and may now become worse. Low liquidity means the market moves faster with larger buy and sell orders, potentially increasing volatility.
Additionally, the (hypothetical) head-and-shoulders pattern currently seen in Bitcoin's 1-day chart is causing fear among traders. This pattern could suggest a drop to $25,000.
Adding to the uncertainty is certainly the congestion of the Bitcoin blockchain by Ordinals and the controversial BRC-20 meme coins, which some in the community view as a DDoS attack. Although there are still 300,000 transactions waiting for confirmation in the mempool, the issue is slowly easing.
The popularity of Bitcoin ordinal transactions is declining. After hitting a historical high of $18.13 million on May 8, volumes have been falling for three days straight. Yesterday, volume fell to $4.86 million. The number of transactions also dropped from 17,000 to 6,000. UniSat's market share has fallen from 80-90% to 50-60%.
Lastly, and equally important, there are currently some unconfirmed rumors (FUD) circulating about Binance US and Grayscale. Binance US has caused a stir in the past few days as Bitcoin prices showed a high price premium. The cause has been the subject of much speculation.
Grayscale is currently under intense scrutiny because it is alleged that DCG owes about $575 million to the bankrupt cryptocurrency lender Genesis Trading due in May, with the loan maturing next week. Rumors suggest Grayscale may sell some holdings on Coinbase to raise the funds needed to repay the loan.
As of the time of writing, Bitcoin's price is $26,289, initially supported by the 100-day moving average.
