Bitcoin, the major cryptocurrency, recently experienced a sharp decline, sinking below the $39,000 mark, leaving the crypto community in disarray. Although market enthusiasts expected a positive market round after the approval of the Spot Bitcoin ETF by the United States SEC, the reality is that the opposite is happening.
At the same time, analysts have studied market trends, finding five trigger factors behind the sudden sell-off.
1. Sale of FTX
FTX's nearly $1 billion sale of Grayscale's Bitcoin Trust (GBTC) shares. The now-insolvent FTX, during its bankruptcy proceedings, liquidated all 22 million shares of GBTC to meet creditor obligations.
2. Approval of ETF & Volatility
The SEC's approval of the United States' Spot ETF sparked optimism among crypto market enthusiasts, but the positive momentum was short-lived. Meanwhile, Grayscale, a major player in the crypto market, is facing criticism for its role in dragging the market down.
3. Investors Observe Opportunities To Generate Profits
The rise in Bitcoin prices throughout 2023, fueled by ETF optimism and the upcoming halving event, is prompting investors to take short-term gains.
4. Regulatory Concerns
The SEC's aggressive stance against crypto players like Coinbase, Binance, and Ripple, along with negative sentiment from figures like Senator Elizabeth Warren and SEC Chairman Gary Gensler, has created uncertainty. Major global players, including the EU, South Korea, and others, who are exploring comprehensive regulations, are also contributing to investors seeking clarity before engaging in the crypto sector.
5. 'Pause' Before Key Economic Data
Investors are keeping an eye on the potential impact on the market after key data was released last week. In addition, key indicators such as the Consumer Price Index (CPI) scheduled for next week, are expected to have an impact on the health of the US economy.
Although the Fed is expected to announce three rate cuts in 2024, any hawkish action by the Fed, deviating from the expected three rate cuts this year, could trigger additional selling in the crypto market.
In a recent look, analyst Ali Martinez warned of a possible drop in Bitcoin's price to $32,700, referring to a bearish pattern. Significantly, Martinez emphasized the correlation between Bitcoin's recent surge to the 78.6% Fibonacci level and the previous cycle, indicating a potential correction to the 50% Fibonacci retracement level.
According to him, if history repeats itself, BTC may experience a significant decline, prompting investors to closely monitor the $32,700 level. The analysis serves as a cautionary note in the volatile crypto market, calling on traders to remain vigilant amid possible price adjustments.
