Author: 636Marx

In the past 24 hours, forced liquidations in the digital market reached $2.868 billion, with Bitcoin dropping to a low of $68,830, resulting in 93,788 accounts being liquidated. The largest liquidation account appeared on Binance, involving BTC contracts worth $11.25 million.

The key factors leading to the decline of Bitcoin are complex, difficult to grasp in full, and have sudden and hidden characteristics. They can be categorized as: macroeconomic conditions, changes in market sentiment, and technical analysis. Technical analysis is the easiest yet least convincing means of market understanding. Below is the author's attempt at analysis, for your amusement.

1. Weak Signals on the Chart

Contract traders typically rely on technical indicators to predict Bitcoin's price movements. Before the recent decline, multiple indicators showed signs of weakening upward momentum for Bitcoin, including low trading volume, negative divergence in the Relative Strength Index (RSI), and inconsistent momentum signals in the Moving Average Convergence Divergence (MACD).

2. Low Trading Volume

Despite Bitcoin's strong price performance in recent months, changes in trading volume have been limited. Typically, a strong upward trend is accompanied by higher trading volume, as more traders participate in the trend. When prices rise without a corresponding increase in trading volume, it usually indicates limited investor participation—this may suggest that prices lack the necessary support to maintain upward momentum. This low trading volume indicates moderate buying pressure, laying the groundwork for Bitcoin's eventual drop below $70,000.

3. Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) Signals

The RSI is a momentum oscillator that showed bearish divergence at Bitcoin's recent highs, indicating that buying momentum is slowing down. Bearish divergence refers to the RSI declining while the price continues to rise, suggesting potential weakness. In Bitcoin's case, the RSI dropped from 76 in March to 59.90, signaling potential selling pressure.

The MACD provides conflicting information regarding trend measurement. The monthly MACD shows positive growth, while the histogram indicates a downward trend—this contradiction suggests that Bitcoin's bullish momentum may be weakening.

While these indicators alone are not conclusive, their consistency warns of downward pressure on Bitcoin.

4. The Role of Altcoins in Bitcoin's Decline

Bitcoin and altcoins typically move in sync during strong market uptrends. However, the recent rise in Bitcoin seems to be a solo effort, with many major altcoins not experiencing the same upward momentum. This divergence serves as a warning signal, indicating that Bitcoin's rise may lack broader market support. History shows that when Bitcoin rises without altcoins following suit, such increases are less likely to be sustained and may face sudden reversals.

During bull markets, the activity of other cryptocurrencies often supports Bitcoin, amplifying overall market bullish sentiment. Therefore, insufficient growth in digital currencies exacerbates Bitcoin's vulnerability, leading to a more imbalanced market environment.

5. Inflation and Interest Rates

High global inflation rates have forced central banks, especially the Federal Reserve, to tighten monetary policy. As interest rates rise, borrowing costs increase, reducing the appeal of speculative assets like digital currencies. In this context, traditional financial instruments (like bonds) become more attractive compared to high-risk assets (like Bitcoin). The risk of further rate hikes to combat inflation has led some investors to reduce their holdings in digital currencies, triggering a decline in Bitcoin's price.

6. Limited Investor Participation

Despite Bitcoin's recent rise, this increase has not reflected broad market participation. The current uptrend is primarily driven by large institutional investors rather than retail traders. The involvement of institutional investors can sometimes lead to short-term gains, as large players control significant trading volumes. When these investors withdraw or reallocate assets, it can cause sudden price drops.

Limited investor participation leads to market imbalance, with Bitcoin experiencing explosive growth within the ecosystem but lacking sustained support.

7. High Leverage and Forced Liquidations in Bitcoin

Another factor influencing Bitcoin's price decline is the prevalence of leveraged positions in the crypto market. Leverage allows traders to amplify potential gains but also increases risk. When prices drop rapidly, highly leveraged positions may face automatic liquidation, further exacerbating the decline.

According to market data, in severe downturns, about 95% of long positions may be liquidated. This liquidation spiral can lead to a chain reaction, with rapid sell-offs intensifying downward momentum. This causes prices to break through key support levels, triggering more liquidations and leading to an overall price drop.

8. Fear and Speculation at High Prices

Market sentiment plays a crucial role in the digital currency space, and like other digital assets, Bitcoin's price volatility largely depends on changes in investor sentiment. During the recent rise, optimism drove Bitcoin's price close to $73,000. However, as prices showed signs of weakness, fear and skepticism resurfaced, prompting investors to lock in profits and withdraw from the market.

The author's self-reflection: Is Bitcoin going up or down?

Bitcoin's recent price drop below $70,000 reflects the interplay of various factors. The author remains optimistic:

Potential for a rebound:

If macroeconomic conditions stabilize and market sentiment improves, as long as it does not quickly drop below $65,000, Bitcoin is likely to experience a rebound. Bitcoin's narrative as an inflation hedge and store of wealth remains attractive in the long term, especially as institutions gradually increase their investment proportions.

Pressure from the U.S. elections:

Currently, Trump is leading in the U.S. elections, but given the precedent of the last Democratic vote manipulation, this prediction puts pressure on the crypto market, particularly in key markets like the U.S. and the EU, which may create sustained downward pressure. The regulatory policies of the new Harris administration may suppress speculative behavior and limit price increases.

In summary, Bitcoin's recent drop below $70,000 reflects its sensitivity to various influencing factors. From technical indicators to macroeconomic forces, regulatory developments, and market sentiment, each factor intertwines to affect Bitcoin's price.

The author is confident that Bitcoin's core position in the financial realm is undoubtedly solid, and it will become the focal point of innovation and speculation in the coming years.