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Why is the price of Bitcoin falling today?
The price of Bitcoin is falling again, after seeing some recovery on Wednesday due to the trend reversal in net flows of Spot Bitcoin ETFs. However, just a day later, it seems that the pioneer cryptocurrency has resumed the downward trend and this decline after the recovery has started a worrying trend. So what are the factors determining this decline?
The price of Bitcoin suffers from sell-offs
One of the main factors that were behind the Decline of Bitcoin is the major sell-off that has shaken the digital asset. These sell-offs are not just from any one investor, but rather from large BTC sell-offs orchestrated by large governments.
One of the biggest news that shook the space was the fact that the German government had started selling coins. In total, the The German government sold approximately 2,786 BTCwhich at the time of sale was worth approximately $140 million.
However, the German government is not the only one to have sold. News also broke that the US government had once again begun moving the Bitcoins seized from the Silk Road bankruptcy. On-chain data aggregator Arkham reported that the US government moved nearly 4,000 BTC from its wallets to the Coinbase exchange.
In total, the US government transferred 3,940 BTC to the exchange, which at the time of the transaction amounted to $241.22 million. This move is concerning as coins are usually moved to centralized exchanges like Coinbase for sale as these trading platforms possess deeper liquidity than their decentralized counterparts.
Has BTC bottomed out?
Although the downtrend appears to have resumed, there are signs that the bottom is closing. One of these signals is the return of demand on the market. For example, Spot Bitcoin ETFs had seen seven consecutive days of outflowswhich finally reversed on Tuesday. Data from Coinglass Shows that inflows into Spot Bitcoin ETFs exceeded $50 million between Tuesday and Wednesday, ending the brutal week of outflows.
Another possible indication is the profit and loss margin for investors. This shows how many Bitcoin investors are currently reporting profits, and the higher the profitability, the greater the likelihood of a sell-off as investors profit from their positions.
However, profitability levels have fallen, meaning investors are less likely to sell their holdings in anticipation of better prices. This often gives demand time to build and create a possible rebound point for a recovery.
For now, Bitcoin price is holding steady at the $61,000 support at the time of writing. But if sales resume, then the pioneer cryptocurrency it may soon fall to the $60,000 level.
Featured image created with Dall.E, chart from Tradingview.com