Why is the price of Bitcoin currently falling? Bitcoin continues to stir up debate with another flash drop on August 19th. Considered digital gold, the value of Bitcoin is highly followed. A drop in the latter often causes the market to fall. It is therefore necessary to understand the underlying reasons for the difficulties of Bitcoin, to approach the crypto world as a whole.
The crypto star had however managed to regain the hair of the beast in recent months. But it is again facing a very violent “bear run” which will have caused it to lose around 6.8% from August 19 to August 24, 2022. As expected, the trend has transferred to other cryptos such as Ethereum , which, however, is supported by his project “The Merge”.
Bitcoin's fall explained in detail
If Bitcoin sees its value so fluctuating, it is because of its particular character compared to other markets. Its decentralized and still new aspect shows us, once again, that you have to have a strong heart if you want to evolve in the world of cryptos. Its fall of almost 7% in a few days is explained by many intertwined factors.
It only took a day for BTC to once again suffer a violent descent. Here, the chart shows us the obvious breakout point on the time frame of August 19, 2022. Since then, it has stabilized just above the symbolic $20,000 mark . Investors fear a further decline in the coming days.
Bitcoin price in euros according to the CoinMarketCap site over a period of 7 days.
Bitcoin loses 5% due to automated contracts in Asia
The largest cryptocurrency by market capitalization has suffered the brunt of its volatility . Bitcoin had nevertheless come out of the water with favorable liquidity expectations in recent months. But now, in such markets, contracts based on futures dominate. It was in Asia that trade panicked with a loss of nearly 5% against the dollar.
This mini-crash is due to a massive liquidation of these contracts , which are managed automatically. A total of $220 million in cryptocurrency soared in the space of an hour this past Friday. The recent rise in price nearing $25,000 will have spelled the end for many contracts that were betting on the crypto's decline.
Bitcoin suffered from the tightening of other stock markets.
Even though cryptos benefit from this “out of time” stereotype compared to other markets, this is not entirely true. The 1% drop in the big markets directly impacted Bitcoin , and this, in an amplified way.
Jose Torres, an economist at Interactive Brokers, explains:
"Bitcoin is a speculative asset and speculative assets do not fare well during tightening regimes when the central bank tightens and liquidity becomes scarce."
For him, the rise of Bitcoin reaching $25,000 was bound to lead to an upcoming correction . Bitcoin was hit hard by the unfavorable situation of markets like the S&P 500 as well as the Euro Stoxx.
A recurring pattern in Bitcoin
This is not the first time that Bitcoin has risen in value before suffering a substantial decline. This is also recurrent in the behavior of investors with cryptocurrency.
Dylan LeClair, the founder of 21st Paradigm pointed this out in one of his tweets by pointing out the same phenomenon when Bitcoin hit $30,000 and $40,000.
According to him, you have to look at the RSI (relative strength index) which allows you to understand the strength of a market and to highlight cases of overbought or oversold. At the moment, the RSI is falling, and if this continues, we can expect Bitcoin to $20,000 in the next few days.
What's next for Bitcoin
It is extremely difficult to predict a potential fall or rise in Bitcoin over the next few days. The opinions of the experts diverge one way or the other.
For Jurrien Timmer, the global macro director for investment firm Fidelity, crypto is still far from reaching its potential.
He declares :
"For me, the main nuance is the slope of the adoption curve… the Bitcoin price is below its actual and projected network curve."
However, many investors like Michael Burry have parted with their assets. This one seems to have predicted a crash of the number 1 cryptocurrency in the world.
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