Bitcoin (BTC) saw a significant decline, hitting a low of $56,700 on Thursday. This price level has not been seen since May 1 as Bitcoin faces several challenges, including political uncertainties in the US and the ongoing sell-off of BTC seized by the German government. These factors have contributed to a nearly 20% price correction for Bitcoin, raising concerns among investors.
Unraveling Bitcoin’s Price Drop
According to a recent Bloomberg reportinvestors are considering possible scenarios if President Joe Biden decides to withdraw his US re-election bid. One possibility is the emergence of a stronger Democratic candidate who could pose a challenge to Republican Donald Trump, whose agenda favors the crypto industry.
Richard Galvin, co-founder of the hedge fund Digital Asset Capital Management, highlights the likelihood of a “stronger Democratic candidate” who may not support the policy. cryptocurrencies as a factor influencing Bitcoin’s short-term weakness.
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In addition, the overhang of the collapsed Bitcoin exchange case on Mount Gox, which plans to start refunding, affected customers of the alleged hack who suffered almost a decade ago, and the sell-off by the US and German governments are contributing to the current weakness in the economy. Bitcoin market.
Traders are closely monitoring the risk of Bitcoin sales by both the US and German governments, which have seized BTC. Recent data from Arkham Intelligence shows that a wallet linked to the German state transferred approximately $75 million BTC to the exchanges on Thursday, adding to a series of similar transfers.
Meanwhile, administrators of the failed Mount Gox exchange are gradually returning a significant amount of Bitcoin to creditors, leaving speculators unsure about the $8 billion’s potential impact on the market.
Miner response and market impact
On the other hand, Bitcoin miners responsible for the computing power that powers the Bitcoin blockchain continue to face the problems financial consequences of the Halving event, reducing the number of new tokens they receive as rewards.
In response, some miners are selling some of their token inventory, increasing selling pressure on Bitcoin. This ongoing battle with selling pressure from miners is impacting Bitcoin’s price performance, as highlighted by Noelle Acheson, author of the Crypto Is Macro Now newsletter.
However, Acheson notes that sentiment in the crypto market can change quickly, especially when it is weaker US economic data raises expectations of looser monetary policy from the Federal Reserve.
Furthermore, the possible approval of US exchange-traded funds (ETFs) to invest in Ethereum could improve the overall mood of the market. Moreover, the interpretation of American political developments may change over time.
Matt Hougan, Chief Investment Officer at Bitwise, suggests that potential changes at the top of the Democratic party will likely result in an improved position for cryptocurrencies. He emphasizes that Washington’s attitude towards digital assets changed positively last year.
Glassnode predicts retest of previous record highs
Despite the negative price performance and uncertainty surrounding BTC’s price, Jan Happel and Yan Allemann, founders of blockchain analytics platform Glassnode, maintain their target for Bitcoin. to report that BTC is expected to reach the $110,000 area before the market peak.
Notably, Allemann and Happel see the current consolidation as a retest of the previous record high. However, for this to happen, Bitcoin will need to cross key levels of $64,000 and later $70,000, which will require further market development and price action.
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According to According to Julio Moreno, the Metcalfe Price Valuation provides insight into the potential support level for Bitcoin’s price. Moreno suggests that $56,000 should be a crucial support level for Bitcoin based on this valuation.
Moreno concluded that if the Bitcoin price fails to hold this key $56,000 level, the correction could potentially deepen, leading to more serious consequences for the market.
BTC has regained the $57,300 level; However, the cryptocurrency is down 5% over the past 24 hours, with no signs of bullish catalysts rising above $60,000 in the near term.
Featured image of DALL-E, chart from TradingView.com