What Caused The Bitcoin Price Drop Today?

The decline in Bitcoin's price today is attributed to traders taking profits and a surge in futures liquidations.

Source: coinmuhendisi.com

The bullish momentum that drove Bitcoin to reach a record high of $73,835 on March 14 is fading, with Bitcoin's price down 10% from that peak on April 2nd. The decrease in Bitcoin price has resulted in a more than 7% decline at the beginning of April. Let's examine the factors influencing Bitcoin's price today in more detail.

Bitcoin Is Experiencing Its Typical Pre-Halving Retracement

Some analysts argue that Bitcoin is entering the early stages of the pre-halving period, which historically adheres to a specific pattern. Like previous halvings, BTC's price seems to be following the five phases of the Bitcoin halving cycle. The current pre-halving pullback coincides with the 18-day mark before the anticipated Bitcoin halving date on April 20. According to independent analysts, the current price movement aligns with a pre-halving retracement, during which BTC experienced declines of 38% and 20% in the 2016 and 2020 halving cycles, respectively.

Bitcoin Liquidations Are Increasing Rapidly

A significant movement in the Bitcoin futures market is evident through liquidations. Long liquidations occurred simultaneously with heightened volatility. Within a 24-hour span on April 2, more than $115 million worth of long positions were liquidated. Bitcoin's long liquidations surged to over $21 million within just 4 hours on the same day. When BTC long positions are liquidated without corresponding buying pressure from traders, it has a negative impact on Bitcoin price. Bitcoin trading volumes have decreased by over $30 billion from the year-to-date peak of $45 billion in daily activity recorded on March 5th.

Short-term Investors on the Rise

An increase in short-term Bitcoin holders has been observed, alongside a significant reduction in trading volume, which has dropped by over 50% from the peaks earlier this year. Meanwhile, long-term investors are engaging in risk mitigation and taking profits. Recent acquisitions of Bitcoin primarily involve these short-term investors, who currently possess the largest share of Bitcoin since July 26, 2021. This trend could contribute to further declines in Bitcoin's price.

Bitcoin's market value continues to be influenced significantly by global economic developments, and it's anticipated that upcoming regulatory measures, the forthcoming Bitcoin halving event, and adjustments in the Federal Reserve's financial policies will also impact Bitcoin's valuation. Despite these challenges, there's an optimistic outlook for Bitcoin's price recovery in the long term. This optimism is fueled by the increasing adoption of Bitcoin by financial institutions, suggesting a promising future for its valuation.

Disclaimer: FameEX makes no representations on the accuracy or suitability of any official statements made by the exchange regarding the data in this area or any related financial advice.