Why Is Bitcoin Price Dropping Suddenly Today?
Bitcoin (BTC) price is falling sharply below the $61,000 level after failing to hold support above $60,000. This decline has raised concerns among analysts about a possible major correction if Bitcoin fails to maintain the final support level of $56,000.
Bitcoin Struggles as PCE Data Cools
Bitcoin’s price action has not responded much to recent U.S. macroeconomic figures. The Federal Reserve’s preferred measure of inflation, the core Personal Consumption Expenditures (PCE) price index, rose 2.6% annually in May, reaching its lowest level since March 2021.
On a monthly basis, core PCE increased at a very slow 0.1%, the slowest increase since November 2023. However, despite these slightly lower inflation numbers, Bitcoin has not been affected much and continues to trade in the $60,000 range. .
Simultaneously, recent actions by the US government have also added to market uncertainty. An address associated with the US government moved 11.84 BTC, worth around $726,000, to a new address. Although relatively small, the transaction is thought to be a precursor to larger moves. Such government actions could cause unease among investors and contribute to speculative fears of a potential large-scale sell-off that could put downward pressure on Bitcoin prices.
Analysts Warn Support Lies Below $60,000
Market analysts are concerned about Bitcoin falling below the $60,000 support level. If the price fails to hold this level, a major bearish momentum could follow and the price could drop to $54,000.
CryptoQuant shows that the critical support level for Bitcoin is $56,000. If this support level is not maintained in the future, there is a risk of a sharp price decline.
Analyst Willy Woo explained that the recent price tests at $58,000 were due to the liquidation of leveraged positions and selling pressure from miners; This shows that the market cannot fully recover from the downtrend without liquidating these positions.
Decreasing Demand, Transaction Volume and Open Interest
Another factor contributing to the price decline of Bitcoin is the decrease in demand from long-term holders and US investors. Long-term BTC holders are reducing their holdings throughout 2024, with significant sell-offs observed in May and June. According to IntoTheBlock data, around 160,000 BTC worth around $10 billion were sold in May, while an additional 40,000 BTC were seen leaving the wallets of long-term holders in June. This steady decline in assets has been associated with fluctuations in the market price of Bitcoin.
Additionally, transaction volume decreased significantly by 12.84% to $39.92 billion. This decline may be indicative of low market turnover and interest from traders, resulting in low liquidity and high volatility.
Source: Coinglass
Open interest, the total number of outstanding derivative contracts, also decreased by 1.94% to $31. 74 billion, which means fewer contracts are being held or opened. However, option open interest increased by 2.18% to $10. 24 billion, which could mean more investors are holding on to their options, possibly due to uncertainty in the market, even though there are fewer new options being traded.
Also Read: Bitcoin ETF, Nvidia and AI Hype Kickstart $400 Billion Investment in ETFs
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Kelvin is a distinguished author specializing in crypto and finance, with a bachelor’s degree in Actuarial Science. Known for her sharp analysis and insightful content, she is fluent in English and specializes in comprehensive research and on-time delivery.
The content presented may contain the personal opinion of the author and is subject to market conditions. Do your market research before investing in cryptocurrencies. Neither the author nor the publication accepts any liability for your personal financial loss.
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