The Bitcoin price is on the decline again after seeing some recovery on Wednesday due to the reversal in the net flows of the Spot Bitcoin ETFs. However, just one day later, it seems that the cryptocurrency pioneer has resumed the downward trend and that this decline after the recovery has started a worrying trend. So, what are the factors causing this decline?
Bitcoin price suffers from sell-off
One of the main factors behind Bitcoin’s decline is the major sell-off that has rocked the digital asset. These sell-offs are not just coming from any investor, but rather they are large BTC sell-offs orchestrated by major governments.
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One of the major news that rocked the space was the fact that the German government had started selling coins. In total, the German government sold approximately 2,786 BTC, which was worth approximately $140 million at the time of the sale.
However, the German government is not the only one selling. News also emerged that the US government had begun moving Bitcoin, which had once again emerged from the Silk Road crisis. On-chain data aggregator Arkham reported that the US government had moved nearly 4,000 BTC from its wallet to the Coinbase exchange.
In total, the US government has moved 3,940 BTC to the exchange, which amounted to $241.22 million at the time of the transaction. This transfer is concerning because coins are typically moved to centralized exchanges such as Coinbase for sale, as these trading platforms have greater liquidity than their decentralized counterparts.
Has BTC bottomed out?
Although the downtrend appears to have resumed, there are signs that the bottom has closed. One of these signs is the return of demand to the market. For example, the Spot Bitcoin ETFs had seen seven consecutive days of outflows, which finally reversed on Tuesday. Data from Coinglass shows that between Tuesday and Wednesday, inflows into the Spot Bitcoin ETFs surpassed $50 million, ending the brutal week of outflows.
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Another possible clue is the profit and loss margin for investors. This shows how many Bitcoin investors are currently seeing profits, and the higher the profitability, the greater the chance of a sell-off as investors take profits from their positions.
However, profitability has fallen, meaning investors are less likely to sell their investments in anticipation of better prices. This often gives time for demand to build and create a possible recovery point.
For now, Bitcoin price remains steady at the $61,000 support at the time of writing. But if the sell-off resumes, the pioneer cryptocurrency could soon fall to the $60,000 level.
Featured image created with Dall.E, chart from Tradingview.com