The market generally believes that the slowdown in the inflow of funds into Bitcoin spot ETFs and the upcoming "halving" event are the main reasons for the sluggish price trend of Bitcoin in the past few days.
Breaking news!
1.8 trillion market value evaporated, more than 150,000 people liquidated their positions
Bitcoin flash crash
Bitcoin (BTC) experienced significant losses today, falling to a 10-day low of $66,045, losing 8% in value. The drop triggered a broader correction across the cryptocurrency market, with the top 10 altcoins also seeing corrections of between 6% and 12%.
Additionally, the global cryptocurrency market’s market capitalization fell by 6% in the past few hours to $2.5 trillion.
The correction resulted in more than $500 million in liquidations across the cryptocurrency market, with $413 million in long positions and $85 million in short positions, according to Coinglass.
Bitcoin alone saw $138 million liquidated, underscoring the impact of the economic downturn on the entire market.
Why did it plummet?
Market sentiment and emotional contagion effect: Bitcoin market sentiment is susceptible to the emotional fluctuations of market participants. When market sentiment turns negative, investors will panic, leading to large-scale selling. In addition, the emotional contagion effect can also increase market volatility. When some investors begin to sell, other investors may follow suit, exacerbating price declines.
Over-hyping and bubbles in the market: During the Bitcoin bull market, price bubbles may form in the market due to investors over-hyping and chasing prices. Once a market bubble bursts, investor panic may lead to massive selling, causing prices to plummet.
Speculation and leveraged trading: The increase in speculators during a bull market can lead to increased market volatility, especially in cryptocurrency markets that support highly leveraged trading. Highly leveraged transactions will amplify the rise and fall of prices. Once a market correction occurs, leveraged positions may be forced to be liquidated, triggering a sharp drop in prices.
Technical factors and network security: Congestion and transaction delays in the Bitcoin network may lead to increased investor unease and exacerbate market volatility. At the same time, technical issues such as cyber attacks or hard forks may also affect market confidence and lead to price declines.
Regulatory Policy Uncertainty: Uncertainty about governments’ regulatory policies for cryptocurrencies can lead to investor panic, especially in a bull market. Negative regulatory news or harsh regulatory measures can trigger a market sell-off, causing prices to plummet.
Market Liquidity and Exchange Issues: Technical issues or security breaches in low-liquidity markets and exchanges can exacerbate market volatility. Exchange malfunctions or security issues can cause panic among investors, triggering massive sell-offs.
These factors interact with each other and jointly influence the volatility and price trends of the Bitcoin market.
Important “halving” event is approaching
A major event in the virtual currency market is about to take place this month - Bitcoin's "halving", which has attracted much attention from investors because it will be directly related to the supply and demand relationship of Bitcoin.
The Bitcoin “halving” event refers to the halving of the rewards received after the production of new blocks, which occurs approximately every four years. The specific time depends on the Bitcoin network's block generation rate, which will reduce the supply of Bitcoin. The halving of block rewards means that it will take longer for all Bitcoins to enter circulation.
According to BTC.com, the current block height is less than 20 days away from the Bitcoin “halving” time. The next Bitcoin "halving" is expected to occur in April when the block height reaches 840,000, when the block reward will drop from 6.25 Bitcoins to 3.125 Bitcoins.
Rekt Capital, a cryptocurrency trader and independent analyst, said that the price of Bitcoin will continue to pull back before the "halving" event. In the "halving" cycles in 2016 and 2020, Bitcoin fell by 38% and 20%, respectively.
Recently, a report from JPMorgan Chase pointed out that the Bitcoin “halving” event is coming in April, which may have a serious negative impact on the profitability of Bitcoin miners. The report warns that the price of Bitcoin may plummet to $42,000 per coin as a result, a potential fall of more than 36% from the current price.
BTC will surge to $150,000 after halving
Morgan Creek Capital CEO Mark Yusko said in an interview with CNBC that although the price of Bitcoin is still below last month's historical high, based on its historical performance, the price of Bitcoin after the halving may surge to $150,000.
He analyzed: “The big moves happen after the halving, and by the end of the year, its trend will start to become more... parabolic. And, historically, it’s about nine months after the halving, so on Thanksgiving, Christmas At some point, we will see a peak in prices before the next bear market."
