Why has the bitcoin price retreated in recent days?
The correction in the price of bitcoin, which occurred after reaching its all-time high near USD 69,000 just over two months ago, is still ongoing. Since last November 10, the first cryptocurrency by market capitalization has fallen 34.56% from that all-time high.
The pullback has been 10.71% to start the year, mainly due to bitcoin's poor performance in the first month of the year. As CryptoNews reported in early February, the BTC price had its worst January since 2018, with a 17% drop. After this significant drop, however, the first two weeks of February saw a 10.34% rebound in the price of BTC. Although the downward movement returned within the framework of price recovery, after the last four days, bitcoin has again seen a drop.
As highlighted by CryptoNews last mid-January, there is a close coupling of bitcoin price with traditional assets, as evidenced by the lower curve of the S&P 500 index.
This high correlation is detrimental to bitcoin as it would increase the influence of macroeconomic announcements on the cryptocurrency's price. On the other hand, this increasing similarity to traditional assets would decrease the attractiveness of bitcoin's inclusion in traditional asset portfolios.
Possible reasons for BTC's price decline
As reported by CryptoNews, last Thursday the 10th saw a moderate bitcoin price rally with the announcement of the worst rise in U.S. inflation in four decades. However, hours later, the information harmed both traditional assets and bitcoin. As a result, the former cryptocurrency closed that day with a loss of 1.8%.
By Friday 11, on the other hand, the increase in the political crisis, with the possibility of an armed conflict between Russia and Ukraine, affected traditional stocks around the world, including the price of bitcoin. As a result, not only did the cryptocurrency close in the red that Friday, but the losses continued, albeit to a lesser extent, over the weekend.
On the other hand, this Monday, the 14th, Glass node highlights that over the past two weeks, miners have stepped up sales of their BTC as the falling price makes their operations less profitable. The increase in sales, which is interpreted as downward pressure on the BTC price, could be associated with a renewal of mining equipment in search of greater efficiency.
CryptoNews published an analysis of the main corrections that have occurred since 2011, both in duration and magnitude, regarding the notorious bitcoin price reversals in the past.
One trend observed was decreasing the magnitude of the price decline in successive corrections. However, a significant increase in the duration of these is also apparent. The decrease in the magnitude of the declines could be associated with changes in bitcoin's volatility, which has been decreasing.
In previous bitcoin cycles, price variations were higher percentage-wise with lower prices and more volatility. In the 2017-2018 cycle, the price decline was close to USD 16,000, while in the recent May-July 2021 correction, the 55% drop represented a decline of over USD 35,000. While currently, the fall so far is 20%, which could suggest that we are primarily in a price consolidation and not in a downtrend.