- Bitcoin has fallen more than 20% from highs of around $74,000 amid a general downturn in most tokens.
- With the entire crypto space falling, all eyes are on the flagship token to gauge where the market is headed.
All Eyes on Bitcoin as Falling Prices Dominate Crypto
The flagship token, Bitcoin (BTC), has taken the spotlight in the crypto space as investors try to gauge overall crypto market sentiment.
Bitcoin has fallen close to $55,000 in a dramatic drop that shows no sign of slowing.
Bitcoin reached a high of around $74,000 in early 2024 before becoming range-bound between $60,000 and $70,000.
Bitcoin’s drop through the $60,000 floor for recent price action has many investors feeling that this is no longer a mere periodic downturn for crypto.
There are many theories about Bitcoin’s falling price floating around social media.
The dominant theory is that the selling pressure from various legal proceedings is spooking the market.
However, the most likely explanation is simple seasonality.
Investment inflows tend to dry up in the summer months, and crypto faces more extreme reactions due to higher overall volatility compared to traditional financial markets.
Mt. Gox Overpowers Trump Bump for Falling Bitcoin Prices
Most speculation on social media about Bitcoin and crypto prices is focused on recent headlines instead of deeper underlying factors.
Many investors expected that Trump’s improving odds of winning the election would lead to a jump in Bitcoin and crypto prices.
Trump’s recent shift to supporting crypto in general and Bitcoin in particular has made him the top pick for investors.
However, it appears that the concern over increased supply from Mt. Gox and similar legal proceedings has overpowered any potential bump following the presidential debate.
“The market continues to face supply overhang in a seasonally low liquidity, low volatility period. With the German government/Silk Road/Mt Gox Bitcoin supply overhang coupled with continued monthly unlocks in venture coins, there’s not enough fresh capital inflows to absorb this.”
– Shiliang Tang, president of Arbelos Markets, stated.
That said, all the most popular theories for the recent price action fail to explain the larger drift below the price range that has dominated most of 2024.
Fundamental and technical analysts have both argued that the falling Bitcoin price represents a larger shift in demand that goes beyond recent headlines.
Slumping Derivatives Bets Contribute to Falling Bitcoin Prices
Much of the rise in Bitcoin prices in early 2024 has been attributed to increased institutional use of futures contracts.
While long interest in BTC futures remains high, the aggressiveness of options bets on these futures has fallen.
Open interest in futures (the demand for futures contracts) has remained steady throughout the recent period of falling Bitcoin prices.
However, the strike prices for options contracts on these futures have fallen dramatically.
Far fewer investors are betting on a rapid rise in the price of Bitcoin compared to previous months.
This fall in demand from institutional investors is likely a significant contributor to falling Bitcoin prices.
