Bitcoin Value Experiences Severe Downturn as Investors offload their Assets and Outflows Persist
In a shockingly dramatic turn of events, the Bitcoin has entered into a correction phase, plummeting to a notable 14% from its highest value this year. This sudden plunge of the Bitcoin price marks the potential onset of a dangerous pattern. The issue manifests itself further with the persistent exchange-traded fund (ETF) outflow.
Market Situation of Bitcoin and the Underlying Issues
The potentially dangerous trends causing the ongoing price correction of Bitcoin appears to be twofold. Firstly, a double-top pattern has become visibly pronounced on the daily chart of Bitcoin price. This pattern calls for attention, as it could be an indication that the value of Bitcoin is at risk.
The fact that the spot Bitcoin ETFs have suffered a loss of over $1.6 billion in assets just within this week fuels concerns. This mass offloading of Bitcoin shares by the exchange-traded funds brings us to the second point of worry. On top of it all, there is an escalation of significant investor anxiety due to these recent liquidations.
Trends in the American Investment Market and the Ongoing Bitcoin Liquidity Surplus
American investors showed a clear tendency to offload their Bitcoin holdings this week. This acts as an ominous sign echoing through the cryptocurrency scene. The crypto Fear and Greed Index notably dipped into the fear zone, and the liquidations had risen considerably. According to gathered data, spot Bitcoin ETFs experienced a major setback, losing more than $1.23 billion in property and assets just this week. The ETFs by BlackRock and Fidelity, dubbed IBIT and FBTC respectively, reported considerable losses, with IBIT seeing a $268 million reduction.
The copious outflows experienced this week lead to a cumulative inflow drop since their inception in January the previous year to an astonishing $61.54 billion. This indicated a stark reversal of fortune compared to the previous fortnights, where they recorded asset increase of almost $6 billion.
Repercussions of the Bitcoin Liquidations and the Surging Investor Concerns
Investors are visibly in a state of shock and panic, following major liquidations owing to the recent crash of the cryptocurrency market. Bitcoin experienced over $4.65 billion in liquidations last Friday alone. This substantial drop in value often drives investors to sell off their coins or step back from the fray, preferring to wait out the bleak days.
Further, the cryptocurrency sector goes through a period of uncertainty as traditional safe-haven assets like gold experience an increase in popularity. The surge in value of the gold assets evidences the rising risks in the global economic system. Problems like the US-China trade war and possible inflation escalation might further destabilize the situation, preventing the federal reserve from reducing the interest rates. Additional risks such as the ongoing US government shutdown and looming credit quality crises due to massive fraud-related losses reported by regional banks are adding to the investor fear.
A Technical Analysis of Bitcoin Price
As analysed on the daily timeframe chart, Bitcoin seemingly falls under increased pressure, with a price drop of almost 14% from its yearly peak. It indicates a state of crash, going below the 50-day moving average. In line with these readings, the Supertrend indicator has turned to red, signalling high caution, while concurrently bitcoin forms a double-top pattern at $124,355.
From a technical analysis viewpoint, a double top by Bitcoin is considered to be one of the more significant bearish signs. The profit target for this pattern is determined by measuring the distance between the head and the neckline, repeating the same from the neckline. The resulting profit target sits at an uncomfortable low of $92,345, which is the lowest since this April. Even though a breakthrough above the resistance level of $113,000 could potentially nullify the bearish outlook, the situation remains tense.
